Do Managers Seek Control and Entrenchment?
49 Pages Posted: 9 Oct 2015 Last revised: 8 Nov 2018
Date Written: November 6, 2018
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: Suggested Citation