Managerial Entrenchment and Information Production

50 Pages Posted: 13 Nov 2017 Last revised: 16 Nov 2018

See all articles by Chen Lin

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Lai Wei

Lingnan University - Department of Finance and Insurance

Wensi Xie

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Date Written: November 16, 2018

Abstract

In this paper, we evaluate the effect of managerial entrenchment on corporate information production using the voting outcomes of shareholder-initiated proposals intended to mitigate managerial entrenchment. We focus on the proposals that are passed or rejected by a small margin of votes, which generate plausibly exogenous variations in managerial entrenchment. We find that a reduction in managerial entrenchment enhances corporate information production. The effects are stronger for firms with greater information asymmetries and severer agency frictions. Overall, the evidence is consistent with the view that reducing managerial entrenchment enhances corporate disclosure by aligning the incentives of managers and shareholders.

Keywords: Shareholder Activism, Shareholder Voting, Managerial Entrenchment, Corporate Information Production

JEL Classification: G14, G34, D82, M41

Suggested Citation

Lin, Chen and Wei, Lai and Xie, Wensi, Managerial Entrenchment and Information Production (November 16, 2018). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=3068603 or http://dx.doi.org/10.2139/ssrn.3068603

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Lai Wei

Lingnan University - Department of Finance and Insurance ( email )

8 Castle Peak Road
Lingnan University
Hong Kong, New Territories
China

Wensi Xie (Contact Author)

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
Hong Kong

Register to save articles to
your library

Register

Paper statistics

Downloads
229
Abstract Views
1,627
rank
135,671
PlumX Metrics