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Managerial Entrenchment and Firm Value: A Dynamic PerspectiveXin ChangNanyang Business School Hong Feng ZhangDeakin University - School of Accounting, Economics and Finance January 15, 2010 Abstract: We examine the impact of managerial entrenchment on firm value using dynamic panel models with firm fixed effects. Instead of using the conventional mean-differencing approach which offers biased estimates in the presence of reverse causality and persistent dependent variables, we employ the system GMM and long differencing estimators which are specifically designed to mitigate the biases. Based on a large sample of public firms in the U.S between 1990 and 2007, we document a causal relation running from managerial entrenchment to firm value after taking into account the impact of omitted variables, reverse causality, and the highly persistent nature of firm value and managerial entrenchment.
Number of Pages in PDF File: 40 Keywords: Corporate governance, Shareholder rights, Firm value JEL Classification: G3, G34, L25 working papers seriesDate posted: January 18, 2010 ; Last revised: January 30, 2010Suggested CitationContact Information
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