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Measuring Management Insulation from Shareholder PressureDaniel FerreiraLondon School of Economics - Department of Finance; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR) David KershawLondon School of Economics - Law Department Tom KirchmaierLondon School of Economics - Financial Markets Group (FMG) Edmund‐Philipp SchusterLondon School of Economics - Law Department June 13, 2016 LSE Legal Studies Working Paper No. 01/2016 ECGI - Finance Working Paper No. 345/2013 Asian Finance Association (AsFA) 2013 Conference Abstract: We propose a management insulation measure based on charter, bylaw, and corporate law provisions that make it difficult for shareholders to oust a firm’s management. Unlike the existing alternatives, our measure considers the interactions between different provisions. We illustrate the usefulness of our measure with an application to the banking industry. We find that banks in which managers were more insulated from shareholders in 2003 were significantly less likely to be bailed out in 2008/09. These banks were also less likely to be targeted by activist shareholders, as proxied by 13D SEC filings. By contrast, popular alternative measures of insulation -- such as staggered boards and the Entrenchment Index -- fail to predict both bailouts and shareholder activism.
Number of Pages in PDF File: 51 Keywords: Corporate Governance, Bank Bailouts Date posted: November 3, 2012 ; Last revised: June 22, 2016Suggested CitationContact Information
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