Do Managers Seek Control and Entrenchment?

49 Pages Posted: 9 Oct 2015 Last revised: 8 Nov 2018

See all articles by Paul Borochin

Paul Borochin

University of Miami - Department of Finance

John D. Knopf

University of Connecticut - Department of Finance

Date Written: November 6, 2018

Abstract

At the IPO date, thrifts have a uniquely diffuse ownership structure and regulatory environment. This allows us to perform a natural experiment to test whether managers seek to entrench themselves. We find strong evidence that managers seek the level of ownership commonly associated with entrenchment (20% to 30%). Also, managers exploit the regulatory environment, by increasing ownership during the five years of takeover protection. This suggests that takeover fears are a strong driver of insider ownership. Finally, we find that managers issue less equity, make shares less liquid and maintain higher debt ratios to support their pursuit of entrenchment.

Keywords: Insider ownership, Agency, Ownership Structure, Entrenchment

JEL Classification: G30, G32, G21

Suggested Citation

Borochin, Paul and Knopf, John D., Do Managers Seek Control and Entrenchment? (November 6, 2018). Available at SSRN: https://ssrn.com/abstract=2670918 or http://dx.doi.org/10.2139/ssrn.2670918

Paul Borochin (Contact Author)

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

John D. Knopf

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

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