Managerial Entrenchment and Capital Structure Decisions

48 Pages Posted: 7 Nov 2008

See all articles by Berger Philip G.

Berger Philip G.

affiliation not provided to SSRN

Eli Ofek

New York University (NYU) - Department of Finance

David Yermack

New York University (NYU) - Stern School of Business

Date Written: December 1996

Abstract

We study associations between managerial entrenchment and firms capital structures, with results generally suggesting that entrenched CEOs seek to avoid debt. In a cross-sectional analysis, we find that leverage levels are lower when CEOs do not face pressure from either ownership and compensation incentives or active monitoring. In an analysis of leverage changes, we find that leverage increases in the aftermath of entrenchment-reducing shocks to managerial security, including unsuccessful tender offers, involuntary CEO replacements, and the addition to the board of major stockholders.

Suggested Citation

Philip G., Berger and Ofek, Eli and Yermack, David, Managerial Entrenchment and Capital Structure Decisions (December 1996). NYU Working Paper No. FIN-96-014, Available at SSRN: https://ssrn.com/abstract=1297113

Berger Philip G. (Contact Author)

affiliation not provided to SSRN

No Address Available

Eli Ofek

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

David Yermack

New York University (NYU) - Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY 10012-1126
United States
212-998-0357 (Phone)
212-995-4220 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~dyermack

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