Journal articles on the topic 'CEOs entrenchment'
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1
Shi, Juehui, and Ngoc Cindy Pham. "The Boundary Conditions of Optimal Contracting and Managerial Entrenchment: A Simultaneous Two-Equation Vector Autoregression with Exogenous Variables Approach for Chief Executive Officer Compensation and Firm Performance." American Business Review 27, no. 1 (May 2024): 182–206. http://dx.doi.org/10.37625/abr.27.1.182-206.
Abstract:
We apply the vector autoregression with exogenous variables (VARX) approach to integrate the optimal contracting theory, the managerial entrenchment theory, the principal-agent theory, the contextual criteria theory, and the upper echelon theory. Based on this new approach, we discover two middle ground conditions between the boundary of managerial entrenchment and optimal contracting, where CEO non-entrenchment or entrenchment cannot be explained by the managerial entrenchment theory or optimal contracting theory alone. For example, some CEOs are not entrenched when the agency problem is not mitigated, while others are entrenched when the agency problem is mitigated. The results imply that merely mitigating the agency problem cannot prevent managerial entrenchment. However, not mitigating the agency problem at all leads to managerial entrenchment. We recommend the boards look at other non-financial means and social approaches (e.g., value- and culture-based trainings, performance recognition, goodwill and friendship building events, pay transparency increase, smooth flow of information among stakeholders, value-adding managerial investments, oversight committee) to minimize the impact of managerial entrenchment on both firm performance and CEO compensation. In addition, we recommend the boards take on the approaches unique to their own firms and their CEOs to address managerial entrenchment.
2
Forst, Arno, Myung Seok Park, and Benson Wier. "Insider Entrenchment and CEO Compensation: Evidence from Initial Public Offering Firms." Journal of Management Accounting Research 26, no. 1 (September 1, 2013): 101–20. http://dx.doi.org/10.2308/jmar-50622.
Abstract:
ABSTRACT We examine how insider entrenching governance choices of firms conducting their initial public offering (IPOs) influence the CEOs compensation contracts post-IPO. Using ten legal provisions affecting insider entrenchment, we find that entrenching governance decisions have a significant effect on CEO compensation post-IPO. Specifically, we observe a positive association between entrenchment and levels of post-IPO salary, total compensation, and pay-for-performance sensitivity. We also find a negative relation between entrenchment and the proportion of CEOs' salary to total compensation. Our observed relationships are principally driven by takeover readiness provision choices rather than voting rights limitation choices. Our results are robust to controlling for potential confounding effects. JEL Classifications: M41; M52; G34; G32.
3
ASLANOĞLU, Suphi, and Tri DAMAYANTİ. "TÜRKİYE'DE YERLEŞTİRME ETKİSİ VE İLİŞKİLİ TARAF İŞLEMLERİ." Muhasebe ve Vergi Uygulamaları Dergisi 15, no. 3 (November 1, 2022): 463–82. http://dx.doi.org/10.29067/muvu.1080458.
Abstract:
This research aimed to understand the important powers that affect Related Party Transactions (RPTs) decisions. It used the agency theory perspective to examine the effect of corporate mechanism, comprising variables of controlling ownership, the CEOs characteristics, and independent board of directors, on the decision of RPTs regarding potential conflicts of interest.
A total of 310 financial reports of Turkish manufacturing listed companies in 2019 and 2020 were assessed. Subsequently, controlling shareholder and CEOs characteristics were discovered to play significant roles in the RPTs mechanism, while the independent board director variable had the highest impact.
The strength of the independent board director effect on RPTs decision represents the function of corporate governance mechanisms. Although entrenchment effects occur in RPTs, the denial or approval of independent board directors was dependent on minority interest. It also highlighted the impact of alignment on RPTs’ decision, since the expropriation of ultimate power was balanced within the independent board director’s role.
4
Yang, Mei-Ling. "The Impact of Controlling Families and Family CEOs on Earnings Management." Family Business Review 23, no. 3 (June 18, 2010): 266–79. http://dx.doi.org/10.1177/0894486510374231.
Abstract:
This study explores the relationships between insider ownership and earnings management in family firms and the impact of family versus nonfamily CEOs on earnings management. The results show that the larger the level of insider ownership, the greater the extent of earnings management, supporting an entrenchment effect of family ownership. Furthermore, consistent with traditional agency analyses, nonfamily CEOs exhibit a greater tendency to manage earnings than do family CEOs.The study suggests that family firms should promote information transparency and quality of accounting reporting to avoid a negative image that suggests that family firms expropriate the interests of outside shareholders.
5
Hollandts, Xavier, Nicolas Aubert, Abdelmehdi Ben Abdelhamid, and Victor Prieur. "Beyond Dichotomy: The Curvilinear Impact of Employee Ownership on CEO entrenchment." Management international 22, no. 2 (March 11, 2019): 112–27. http://dx.doi.org/10.7202/1058165ar.
Abstract:
Employee stock ownership gives employees a voice and therefore may have a major impact on corporate governance. Thus, employee stock ownership may be a powerful mean to protect CEOs from both market for corporate control and dismissal threat. In this paper, we examine the relationship between employee stock ownership and CEO entrenchment. Following the recent French legislative changes, we use a comprehensive panel dataset of the major French listed companies over the 2009-2012 period. We document inverted U-shaped relationships between employee stock ownership and CEO entrenchment. Board employee ownership representation also plays a role and increases the inflexion points of these curvilinear relationship.
6
Woo, Heejin. "New CEOs’ previous experience and acquisition performance." International Journal of Organizational Analysis 27, no. 3 (July 8, 2019): 745–58. http://dx.doi.org/10.1108/ijoa-03-2018-1389.
Abstract:
Purpose This study aims to investigate how new CEOs’ previous experiences in other organizations and other industries create value in acquisitions. Drawing on the upper echelon perspective, this study theorizes that the multiorganizational experience of new CEOs is positively associated with acquisition performance and, in particular, that the multi-industry experience of new CEOs leads to better performance in diversifying acquisitions than in related acquisitions. While new CEOs without multiorganizational experience undergo a cognitive entrenchment in firm-specific experience, new CEOs with multiorganizational experience can lead acquisitions with more flexibility and agility. Design/methodology/approach Acquisition and organizational data were drawn from the US manufacturing industries (SIC 20-39) between 2008 and 2010. The event study method was used to test hypotheses. In 346 acquisitions made by 139 firms, acquisition performance was measured according to cumulative abnormal returns. Findings Consistent with the hypotheses, the multiorganizational experience of new CEOs was positively associated with acquisition performance and, in particular, the multi-industry experience of new CEOs led to better performance in diversifying acquisitions than in related acquisitions. Originality/value This paper contributes to the CEO literature and acquisition literature by suggesting that the multiorganizational experience of new CEOs can be a valuable source of competitive advantages, particularly when implementing corporate strategies involving interorganizational integration processes.
7
Keil, Thomas, Markku Maula, and Evangelos Syrigos. "CEO Entrepreneurial Orientation, Entrenchment, and Firm Value Creation." Entrepreneurship Theory and Practice 41, no. 4 (July 2017): 475–504. http://dx.doi.org/10.1111/etp.12213.
Abstract:
We investigate how CEO entrepreneurial orientation affects firm value creation and how this relationship is moderated by three sources of CEO entrenchment. We conducted a longitudinal analysis of S&P 500 firms between 1999 and 2007, and, in line with our predictions, we found that CEO entrepreneurial orientation enhances firm value creation and that this positive effect is reduced when CEOs are entrenched (1) due to corporate governance provisions that protect them from the majority will of shareholders, (2) due to substantial ownership that provides them too much decision–making power, and (3) because their family has substantial holdings in the corporation.
8
Mateus, Cesario, Thomas Hall, and Irina B. Mateus. "Are listed firms better governed? Empirical evidence on board structure and financial performance." Corporate Ownership and Control 13, no. 1 (2015): 736–55. http://dx.doi.org/10.22495/cocv13i1c7p2.
Abstract:
We examine the relationship among board characteristics (network centrality, leadership structure, outsider participation, portion of male directors, director age, and presence of financial experts) and firm-level financial performance (cash holdings, leverage, ROA, risk, and risk-adjusted return). Our data encompass firms from eight countries during 2003-2012. Unlisted firms are smaller and have less leverage. Despite the fact that unlisted firms have prima facie better average governance (they are less likely to have an executive chair (or CEO as chair of the board) and a higher average portion of outside directors), they exhibit worse risk-adjusted returns. Higher levels of director connectedness (centrality) are generally associated with more observable entrenchment (more cash, less leverage), whereas other board characteristics do not show clear relationships with entrenchment. Our findings are consistent with the view that firmly established CEOs are willing and able to pack the board with qualified and connected members, who nevertheless do not act to constrain CEO entrenchment. This is true for both listed and unlisted firms
9
Fagbemi, Temitope Olamide, Olubunmi Florence Osemene, and Oyinlade Agbaje. "Management Entrenchment, Firm Characteristics and Earnings Management Of Conglomerate Companies In Nigeria." Jurnal Administrasi Bisnis 9, no. 1 (March 22, 2020): 1–14. http://dx.doi.org/10.14710/jab.v9i1.28576.
Abstract:
Sometimes the rivalry between shareholders and management is an indication of the level of entrenchment within the corporate environment. Managers are believed to routinely manipulate earnings in order to mislead shareholders about their company's actual economic outlook or performance. As a result, the study investigated the impact of managerial entrenchment, firm characteristics and earnings management of conglomerate companies in Nigeria. Employing the ex-post facto research design, the data was gathered from secondary source of the 6 listed conglomerate companies for the 11-year period running (2008-2018). The study used discretionary accruals a proxy for earnings management and to calculate discretionary accruals, the study used modified Jones model. The result showed that management entrenchment and firm characteristics have Impact on multinational firms ' earnings management in Nigeria. Specifically, from the conglomerate’s entrenchment proxies, CEO’s tenure has a positive and significant impact on earnings management (coff. =1.062821, p-value =0.0367) and management entrenchment as measured by CEO’s shareholding has a negative and insignificant effect on earnings management (coff. =-6252391, p-value = 0.4090) while firm size, profitability and leverage indicated a significant and positive impact on earnings management (coff, = 0.124587, p-value = 0.0000; coff. = 0.006647, p-value = 0.0431 and coff. = 0.032065, p-value = 0.0000). The study therefore recommended among others that management should reduce the debt in their capital structure in order to improve their companies’ value and their capital structure should be majorly financed by equity rather than debt and reduce CEOs tenure to minimise earnings management practices.
10
Kang, Hyung Cheol, and Jaemin Kim. "Why do family firms switch between family CEOs and non-family professional CEO?" Review of Accounting and Finance 15, no. 1 (February 8, 2016): 45–64. http://dx.doi.org/10.1108/raf-03-2015-0032.
Abstract:
Purpose – This study aims to examine whether a switching decision between a family CEO and a non-family professional CEO has a different effect on firm performance and what determines such a decision by family firms. Design/methodology/approach – This study uses multiple regressions, Probit and univariate analyses, based the sample of family-controlled Chaebol firms in Korea for the 11-year period from 2001 to 2011. Findings – Evidence found was consistent with the family entrenchment hypothesis: firms experiencing declining Q value are more likely to replace family CEOs with non-family CEOs, and that these firms, having switched to non-family CEOs, exhibit an improvement in firm performance as measured by the change in Q value. On the other hand, for those firms that replace non-family CEOs with family member CEOs, no evidence was found that the switching decision either decreases or increases firm performance. The results of Probit and univariate analyses suggest that firms switching to family CEOs tend to be larger, stock-exchange listed and more “central”, with more cash flow rights held by the controlling families and with relatively more equity holdings in the other affiliated firms of the same Chaebol group. In contrast, firms switching to non-family CEOs tend to be smaller, unlisted and less “central”, with less equity holdings in the other affiliated firms of the same Chaebol group. Originality/value – This study sheds light on the different value implications and determinants of a decision between “family CEO” and “non-family CEO”.
11
Jadoon, Imran Abbas, Umara Noreen, Usman Ayub, Muhammad Tahir, and Naima Shahzadi. "The Impact of Family Ownership on Quality and Disclosure of Internal Control in Pakistan." Sustainability 13, no. 16 (August 5, 2021): 8755. http://dx.doi.org/10.3390/su13168755.
Abstract:
The role of family owners in the internal control environment is characterized by contradictory theoretical arguments i.e., entrenchment and alignment behavior. Therefore, the objective of this study is to investigate the behavior exhibited by family owners concerning the internal control environment in an underdeveloped regulatory setting. The study collected both primary and secondary data to use a multivariate regression research design to investigate the impact of family owners and CEOs on the internal control quality and disclosure of enterprises. The results of the current study demonstrated that family owners and family CEO have a negative impact on the internal control quality and disclosure, which validates the entrenchment behavior exhibited by family owners in the Pakistani setting. The results of the current study imply that policymakers should promote strict policy initiatives regarding the effectiveness of internal controls and their reporting so that companies are compelled to have better engagement in internal control practices for the protection of minority shareholders.
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Lachuer, Julien, and Jean-Jacques Lilti. "Do Sustainability Reports Make Sense for Asset Selection?" La Responsabilité Sociale de L’entreprise comme système ordonné dans un environnement chaotique 25, no. 2 (May 27, 2021): 88–106. http://dx.doi.org/10.7202/1077786ar.
Abstract:
The purpose of this article is to determine whether the discourse in sustainability reports and in the CEOs’ opening speech is likely to provide relevant information to asset managers. Our results show that greenwashing and entrenchment strategies from executives are detrimental to the social and financial performance of portfolios. Thus, our study combines lexical analysis with data on financial performance and level of responsibility. The methodology developed enables us to reveal what is not said and to establish a reading grid that limits the risk of informational asymmetry.
13
Le-Bao, Thy, Linh Ho, and Dai Lang. "Basel III standards and liquidity determinants in Vietnamese commercial bank." Journal of Eastern European and Central Asian Research (JEECAR) 10, no. 3 (June 5, 2023): 401–12. http://dx.doi.org/10.15549/jeecar.v10i3.1176.
Abstract:
This study aims to ascertain the determinants affecting the liquidity of Vietnamese Commercial Banks by their bank ownership structures, CEO characteristics, and bank-specific variables. Using panel data consisting of 29 Vietnamese commercial banks, we measure liquidity using the most up-to-date method – the Net Stable Funding Difference (NSFD), according to Basel III standards. Correlating to the relationship between CEOs’ characteristics and bank liquidity, we found that CEOs with longer tenure will control liquidity better due to their higher managerial power and entrenchment. Moreover, the findings of the present study show that local market power, bank age, bank size, and loan loss provision positively impact bank liquidity. In contrast, further investigation reveals the adverse impact of state ownership on bank liquidity. This study provides insights into the prudential supervision of Vietnamese commercial banks, which implications for policymakers, by applying the latest liquidity measurement method and new findings on liquidity determinants.
14
Venanzi, Daniela, and Ottorino Morresi. "Is family business beautiful? Evidence from Italian stock market." Corporate Ownership and Control 7, no. 3 (2010): 173–87. http://dx.doi.org/10.22495/cocv7i3c1p2.
Abstract:
From the agency perspective, literature studying links between investor protection and governance profiles argues that family is more disposed than other shareholders to divert private benefits in countries with a poor legal framework: the question is empirically puzzling. From the stewardship perspective, the degree of familiness affects the stewardship attitude of the firm. We do not find that family firms perform worse or better than non-family counterparts. Some evidence is found as regards the entrenchment effect: family CEOs seem to weaken firm performance. Stewardship attitude – not familiness – does matter: moderate levels of stewardship improve performance and increase risk-taking.
15
Franco, Julián Benavides, Samuel Mongrut Montalván, and Mónica González-Velasco. "Family ties, do they matter? Family ownership and firm performance in Peru." Corporate Ownership and Control 9, no. 4 (2012): 96–107. http://dx.doi.org/10.22495/cocv9i4art7.
Abstract:
This paper studies the relationship between ownership concentration, family ownership, management, and market and accounting performance for 59 industrial firms listed in the Lima Stock Exchange during the period of 1999 to 2005. An inverted U-shaped relationship was found between ownership concentration and market performance in both family and non-family firms, pointing out an entrenchment effect or excessive risk aversion of the controlling group. This effect is worsened for family firms. The presence of family members as CEOs, Chairmen and Board Members is also negative for a firm’s performance and family ownership was found to increase the leverage of a firm.
16
Kang, Fei. "Founding Family Ownership and the Selection of Industry Specialist Auditors." Accounting Horizons 28, no. 2 (January 1, 2014): 261–76. http://dx.doi.org/10.2308/acch-50714.
Abstract:
SYNOPSIS This study examines how family firms' unique ownership structure and agency problems affect their selection of industry-specialist auditors. Using data from Standard & Poor's (S&P) 1500 firms, the results show that family firms are more likely to appoint industry-specialist auditors than non-family firms, which suggests that family firms have strong incentives to signal the quality of financial reporting. Additional analysis indicates that due to the potential entrenchment problems, family firms with family member CEOs or with dual-class shares have even a higher tendency to hire industry-specialist auditors to signal their disclosure quality.
17
Yami, Nafisah, and Jannine Poletti-Hughes. "Financial Fraud, Independent Female Directors and CEO Power." Journal of Risk and Financial Management 15, no. 12 (December 2, 2022): 575. http://dx.doi.org/10.3390/jrfm15120575.
Abstract:
This paper investigates the effect of female directors on financial fraud, focusing on the role of independent female directors and their demographics, such as experience, financial expertise, and audit committee membership. We find that independent female directors have a negative and significant influence on financial fraud, which is enhanced by their experience and financial expertise. The positive effect is also significant for those female directors that are members of the audit committee and have financial expertise. Independent female directors offset the increased likelihood of fraud in the presence of powerful CEOs, suggesting that the impact of their contribution is more valuable when there is managerial entrenchment.
18
Hu, Aidong. "Empirical Test about Differential Board Monitoring and CEO Compensations in High-Tech vs. Traditional Firms." Journal of Finance Issues 6, no. 1 (June 30, 2008): 62–75. http://dx.doi.org/10.58886/jfi.v6i1.2430.
Abstract:
I examine how firm characteristics and CEO compensation contract affect the independent board monitoring activities between high-tech and traditional firms. Corporate board monitoring activities are measured by annual board meetings, and the propensity to hold board meetings is significantly and positively associated with the size of the firm and is significantly and negatively associated with Return on Equity (ROE) as predicted by corporate governance under managerial entrenchment hypothesis. Using data on 1,735 corporations during 1992-2000, I find evidence that high-tech firms use different compensation plans to motive CEOs and exhibit different attributes from those of traditional firms. CEOs in both high-tech and traditional firms who have long tenure, high level of cash compensation are less likely to hold frequent board meetings. However, the existence of executive stock options and CEO long-term incentive plan may increase the frequency of board meetings. My model performs well in predicting number of board meetings for high-tech and traditional firms using out-of-sample period of year 2001 and 2002. My results extend and refine the growing literature on the relation of executive compensation, board activitiesand corporate governance.
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Cooper, Elizabeth. "Corporate social responsibility, gender, and CEO turnover." Managerial Finance 43, no. 5 (May 8, 2017): 528–44. http://dx.doi.org/10.1108/mf-02-2016-0049.
Abstract:
Purpose The purpose of this paper is to explore the research question whether corporate social responsibility (CSR) and gender influence the likelihood of CEO turnover. Design/methodology/approach The author uses a large sample of firms over a 21-year period from 1992 to 2013 taken from firms cross-listed in the ESG STATS, Execucomp, and Compustat databases. Logistic regression is used to analyze the determinants of both CEO turnover and the gender of the newly hired CEO. Findings Firms with better social performance have higher rates of CEO turnover, performance notwithstanding. Further, for firms with decreasing financial performance, it is more likely they will replace their CEO if they have strong CSR vs firms with weak CSR records. In addition, as performance deteriorates, male CEOs will have a higher chance of being replaced relative to female CEOs. For female CEOs, other factors besides financial performance are important determinants of the likelihood of a turnover taking place. Research limitations/implications This study finds support for the stakeholder theory of CSR and does not support entrenchment theory. It is the first study to look at CSR, CEO turnover, and gender issues concurrently. Practical implications For practitioners looking for tangible effects of CSR in the workplace, this paper provides evidence that it does matter in terms of CEO turnover. The findings suggest that CSR is acting as a deterrent to bad behavior on the part of executives in the face of weak financial performance in particular. Originality/value This study is the first to look at the impact of CSR on CEO turnover. Importantly, the findings suggest that CSR is not something that a firm decides or thinks about in the “right” financial environment but is rather an omnipresent focus embedded within the mission of the firm.
20
Dikolli, Shane S., Susan L. Kulp, and Karen L. Sedatole. "The Use of Contract Adjustments to Lengthen the CEO Horizon in the Presence of Internal and External Monitoring." Journal of Management Accounting Research 25, no. 1 (January 1, 2013): 199–229. http://dx.doi.org/10.2308/jmar-50395.
Abstract:
ABSTRACT We investigate whether boards of directors adjust compensation contracts to lengthen a CEO's decision horizon, and if the use of such contract adjustments depends on the levels of external (i.e., shareholder-based) and internal (i.e., board-based) CEO monitoring. Based on insights from the career-concerns literature, we identify short-horizon CEOs as those nearing retirement, at a firm with a current earnings decline or loss, and/or with an impending job change. We find that firms with a CEO identified as having a short-horizon place greater contract weight on forward-looking information. This horizon-lengthening contract adjustment is less pronounced when there is greater external monitoring (i.e., as proxied by a high level of shareholder rights), consistent with the intuition that increased shareholder rights mitigate CEO entrenchment, leading to less myopic decision making, independent of a contract adjustment. However, we also find that the horizon-lengthening contract adjustment is more pronounced when there is greater internal monitoring (i.e., as proxied by characteristics of the board), consistent with the intuition that increased employment risk from more intense internal monitoring itself creates a demand for increased incentive weights as a means of compensating the CEO for the increased risk. Data Availability: Data used for this study are derived from publicly available databases and proxy statements. JEL Classifications: M52; M41; J33.
21
Hu, Aidong. "Connection Between CEO Characteristics and Board Meetings: An Empirical Analysis." Journal of Finance Issues 10, no. 2 (December 31, 2012): 1–14. http://dx.doi.org/10.58886/jfi.v10i2.2312.
Abstract:
I examine how firm characteristics and CEO characteristics affect the frequency of annual board meetings. The data sample covers the post Sarbanes-Oxley Act era between 2002 and 2006. Using a Tobit qualitative response model with a data set of 1,273 corporations from ExecuComp, I find evidence that seasoned CEOs with high level of stock ownership and cash compensation are less likely to hold frequent board meetings as predicted by the hypothesis of corporate governance under managerial entrenchment. The propensity to hold board meetings is significantly and positively associated with the size of the firm and is significantly and negatively associated with Return on Equity (ROE). However, the existence of executive stock options and CEO long-term incentive plan may increase the frequency of board meetings. My results extend and refine the growing literature on the relation of executive compensation, board activities and corporate governance.
22
Reddy, Krishna, Sazali Abidin, and Linjuan You. "Does corporate governance matter in determining CEO compensation in the publicly listed companies in New Zealand? An empirical investigation." Managerial Finance 41, no. 3 (March 9, 2015): 301–27. http://dx.doi.org/10.1108/mf-09-2013-0253.
Abstract:
Purpose – The purpose of this paper is to investigate the relationship between Chief Executive Officers’ (CEOs) compensation and corporate governance practices of publicly listed companies in New Zealand for the period 2005-2010. Design/methodology/approach – Prior literature argues that corporate governance systems and structures are heterogeneous, that is, corporate governance mechanisms that are important tend to be specific to a country and its institutional structures. The two corporate governance mechanisms most important for monitoring CEO compensation are ownership structure and board structure. The authors use a generalised least squares regression estimation technique to examine the effect ownership structure and board structure has on CEO compensation, and examine whether ownership structure, board structure, CEO and director compensation have an effect on company performance. Findings – After controlling for size, performance, industry and year effects, the authors report that internal features rather than external features of corporate governance practices influence CEO compensation. Companies that have their CEO on the board pay them more than those who do not sit on the board, suggesting CEOs on boards have power to influence board decisions and therefore boards become less effective in monitoring CEO compensation in the New Zealand context. Companies that pay their directors more tend to reward their CEOs more as well, thus supporting the managerial entrenchment hypothesis. Research limitations/implications – The results confirm the findings reported in prior studies that institutional investors are ineffective in monitoring managerial decisions and their focus is on decisions that benefit them on a short-term basis. Practical implications – The findings indicate that although the proportion of independent directors on boards does not significantly influence CEO compensation, it does indicate that outside directors are passive and are no more effective than insiders when it comes to the oversight and supervision of CEO compensation. Originality/value – Being a small and open financial market with many small- and medium-sized listed companies, New Zealand differs from large economies such as the UK and the USA in the sense that CEOs in New Zealand tend to be closely connected to each other. As such, the relationship between pay-performance for New Zealand is found to be different from those reported for the UK and the USA. In New Zealand, the proportion of institutional and/or block shareholders is positively associated with CEO compensation and negatively associated with company performance, suggesting that it is not an effective mechanism for monitoring CEO compensation.
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AL-Duais, Shaker Dahan, Ameen Qasem, Wan Nordin Wan-Hussin, Hasan Mohamad Bamahros, Murad Thomran, and Abdulsalam Alquhaif. "CEO Characteristics, Family Ownership and Corporate Social Responsibility Reporting: The Case of Saudi Arabia." Sustainability 13, no. 21 (November 5, 2021): 12237. http://dx.doi.org/10.3390/su132112237.
Abstract:
Only a few studies have investigated the association between the characteristics of the chief executive officer (CEO) (i.e., tenure and local or expatriate) and corporate social responsibility (CSR) reporting. Our study adds to the fledgling literature by providing new evidence from Saudi Arabia. Given the dominance of family control among Saudi Arabian listed firms, additionally, this study examined the moderating effect of family ownership on the CEO-CSR relationship. Using CSR scores from Bloomberg database from 2010 to 2019 and ordinary least squares (OLS) regression, the findings reveal that the association between CEO tenure and CSR reporting is positively significant; however, the association between CEO nationality and CSR is not significant. In addition, the findings indicate that family ownership is an important contingency factor that explains the association between CEO tenure and CEO nationality, and CSR reporting. Our study contributes to an emerging line of CSR research that investigates the effects of foreign CEOs on CSR transparency, and supports prior evidence on the benefits to investors of having long-serving CEO and the costs of family entrenchment.
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Hu, Aidong, and Vincent Richman. "Examination of Board Meeting Frequency and CEO Characteristics: A Comparison of Dividend Paying and No-Dividend Firms." Journal of Finance Issues 5, no. 2 (December 31, 2007): 199–211. http://dx.doi.org/10.58886/jfi.v5i2.2626.
Abstract:
This abstract was created post-production by the JFI Editorial Board. The monitoring role of corporate boards has been under close scrutiny by dissatisfied investors in recent years. The Institutional Shareholder Service, Inc., the Business Roundtable, and the National Association of Corporate Directors advocate many suggestions regarding how to improve corporate governance. In this research, we investigate the relation between board monitoring activities, measured by board meeting frequency, and various firm and CEO characteristics under differential dividend payout policies. The theoretical and empirical literature on corporate governance and managerial entrenchment makes a number of unambiguous predictions regarding corporate board activities. We examine these implications and differential characteristics between dividend-paying firms and non-dividend firms by considering firm attributes and managerial compensation contracts. While our results support the theoretical predictions, we also find significant difference between dividend-paying firms and non-dividend firms regarding the board meeting frequency. We also find that duality of CEOs can increase the likelihood of holding more board meetings and the weight of intangible assets do not significantly affect the likelihood of board meeting frequency.
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Krigman, Laurie, and Mia L. Rivolta. "Can non-CEO inside directors add value? Evidence from unplanned CEO turnovers." Review of Accounting and Finance 18, no. 3 (August 12, 2019): 456–82. http://dx.doi.org/10.1108/raf-06-2018-0111.
Abstract:
Purpose This paper aims to investigate the roles of non-CEO inside directors (NCIDs) in the new CEO-firm matching process using the context of unplanned CEO departures when immediate CEO succession planning becomes a sole board responsibility. Although critics argue that inside directors decrease the monitoring effectiveness of a board, inside directors arguably possess superior firm-specific experience and knowledge that can be beneficial during the leadership transition. Design/methodology/approach The authors use a comprehensive, manually collected data set of unplanned CEO departures from 1993 to 2012. Findings The authors find that NCIDs play an important role in the CEO transitioning process. They help firms identify qualified inside replacements and provide stability as the new permanent or interim CEO. In addition, NCIDs facilitate the transfer of information and help the new external CEOs succeed. They show that the longer the NCID stays with the company, the longer the tenure of the new CEO. They also document that the presence of NCIDs improves operating and stock performance; especially when the new CEO is hired from outside of the firm. Practical implications The impact of NCIDs is particularly important when the firm hires an outsider as the new CEO. These results suggest that board composition affects frictions in the CEO labor market. Originality/value The literature has predominantly focused on the downside of having inside directors. Too many inside directors on a firm’s board is often associated with ineffective boards and entrenchment. To the contrary, the authors focus on a potential benefit of having inside directors.
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Baxamusa, Mufaddal. "The Relationship between Underinvestment, Overinvestment and CEO's Compensation." Review of Pacific Basin Financial Markets and Policies 15, no. 03 (September 2012): 1250014. http://dx.doi.org/10.1142/s0219091512500142.
Abstract:
This research separates out the incentive and entrenchment effects of executive pay and uses it to test if the agency cost is that of underinvestment or overinvestment. I find that investments increase with dollar value of stock and options owned by the CEO but decrease with percentage of shares owned by the CEO. These results are robust to alternate measures of investments such as R&D, acquisitions, and change in assets. It appears that the positive relationship between investment and percentage of stocks owned by the CEO, as observed in the literature, is because of the omitted variable of dollar value of stock and options. I also find that the increases in dollar value of stock and options owned by the CEO reduces agency costs; while increases in percentage of stocks owned by the CEO increases entrenchment. These results are robust to endogeniety and a battery of relevant tests. This research concludes that, for the average firm, the agency cost is that of underinvestment, while the concerns about overinvestment are overstated.
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Mirchandani, Kiran, and Sheldon M. Bromfield. "The Entrenchment of Racial Stratification Through the Colour-Blind Employment Standards Enforcement Regime in Ontario." Canadian Ethnic Studies 53, no. 1 (2021): 23–45. http://dx.doi.org/10.1353/ces.2021.0001.
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Feriozzi, Fabio. "Managerial Entrenchment and the Market for CEOs." SSRN Electronic Journal, 2009. http://dx.doi.org/10.2139/ssrn.1342989.
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Adams, Mike, Wei Jiang, and Tianshu Ma. "CEO power, corporate risk management, and dividends: disentangling CEO managerial ability from entrenchment." Review of Quantitative Finance and Accounting, October 17, 2023. http://dx.doi.org/10.1007/s11156-023-01216-6.
Abstract:
AbstractWe contribute to the literature on dividend policy by considering two largely ignored, yet important factors, namely CEO power and corporate risk management. We first disentangle CEO managerial ability from entrenchment - the two sources of leadership autonomy that are not normally distinguished in prior literature. Using UK (re)insurance data that allows us to objectively and reliably quantify risk management and to identify powerful stakeholders with monitoring incentives (e.g., shareholders and regulatory body), we find that risk management enables entrenched CEOs to increase dividends to avoid monitoring by shareholders without compromising financial resilience and increasing the risk of regulatory scrutiny. Further, we neither find the degree of CEO managerial ability nor its interaction with risk management to be related to dividends, suggesting that the competing incentives for talented CEOs to pay higher/lower level of dividends cancel out in cross-sectional tests. Nonetheless, we find that the signalling effects of dividends for future accounting earnings only exist in insurers with high ability CEOs. This is consistent with the view that talented CEOs are able to generate sustainable earnings, and when they choose to pay (more) dividends, they do so to externally signal their managerial ability.
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Feriozzi, Fabio. "Managerial Entrenchment and the Market for Talent." Review of Corporate Finance Studies, August 19, 2022. http://dx.doi.org/10.1093/rcfs/cfac028.
Abstract:
Abstract This paper studies how the nature of managerial skills affects firms’ governance decisions. As required skills shift from firm specific toward more general abilities, replacing an underperforming CEO with an outside hire becomes more profitable for shareholders. Therefore, firms adopt stronger governance arrangements to limit the entrenchment of incumbent CEOs and exploit the improved opportunities offered by the market for talent. The analysis rationalizes the observed trend toward stronger corporate governance and offers novel empirical predictions concerning the relationship between managerial entrenchment, firm size, and the nature of managerial skills.
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Peng, Chih-Wei, Huei-Ru Tsai, Kuo-Chih Cheng, and Tsung-Fu Chuang. "Do the Choices of Family Business CEOs Affect Investment Decisions?" Journal of Applied Finance & Banking, August 3, 2023, 37–61. http://dx.doi.org/10.47260/jafb/1363.
Abstract:
Abstract Family firms are a common organizational form in emerging economies. Almost 80% of firms are controlled by families and 40% of them are controlled by founder CEOs in Taiwan. Thus, family founders play an important role in complex financial decisions. In addition, the average age of family CEOs is around 60 years old, so now is a big time for the succeeding generation to make the right decisions leading to a successful family business. However, prior studies have contradictory conclusions about the relationship between family firms and investment policies. The sample is based on data from Taiwan family firms for whom the data was manually collected on annul reporting over a period of 2009-2015. Unlike the expectation of the entrenchment effect, we find that both family founder and family descendant CEOs have a propensity to undertake efficient investment decisions, which supports the socioemotional wealth perspective. JEL classification numbers: G11, D61, J12. Keywords: Investment efficiency, Over-investment, Family Founder, Family Descendants.
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Bouaziz, Dhouha, and Anis Jarboui. "Does the CEO’s entrenchment affect the financial communication quality? Empirical evidence from France." Journal of Accounting and Management Information Systems 23, no. 1 (March 30, 2024). http://dx.doi.org/10.24818/jamis.2024.01005.
Abstract:
Research Question: What is the impact of the CEO’s entrenchment on the financial communication quality in the French context? otivation: In fact, it is important to study the different characteristics of the CEO, which can facilitate the entrenchment and their effect on the quality of financial communication in the French context. Idea: The purpose of this paper is to investigate the impact of the CEO’s entrenchment on the financial communication quality examined by the discretionary accruals. Data: Our sample is made up of 335 companies listed on the CAC All Tradable index for the period from 2011 to 2020. However, we have excluded some financial companies due to their atypical behavior in financial reporting, firms with insufficient annual reports and firms with insufficient data about the CEO’s entrenchment. Therefore, the final number of firms used in this study was 151 over ten years, producing a total of 1510 firm-year observations. Tools: Our regressions will be estimated by the feasible generalized least squares (FGLS) method. Findings: Using the discretionary accruals, as a proxy for the earnings management, we obtained results from the Kothari et al. (2005) model, which indicates that there is a significant positive relationship between the CEO’s duality, ownership and the quality of financial communication, while there is no significant relationship between the CEO’s turnover and the financial communication quality. Contribution: This research is a contribution to the literature by demonstrating how the CEOs' entrenchment enables them to manipulate the accounting results to improve their financial situation.
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Zhang, Xingyi, Qingfeng Wang, and Weimin Liu. "Political power differential and forced CEO turnover: Evidence from Chinese non‐state‐owned enterprises." International Journal of Finance & Economics, April 8, 2024. http://dx.doi.org/10.1002/ijfe.2978.
Abstract:
AbstractIn China, the prevalence of strong political connections among a significant number of boards of directors and CEOs highlights the importance of cultivating such relationships. This is particularly relevant when considering the Chinese political system where officers holding higher political ranks wield dominant, or even absolute, power in decision‐making. Our findings reveal that the political power differential (PPD) between a board of directors and its CEO plays a pivotal role in mitigating CEO entrenchment associated with political power. Specifically, when directors possess more political power than their CEOs, they can effectively fulfil their disciplinary role, leading to the dismissal of underperforming CEOs. Our study substantiates a significantly positive relationship between PPD and the probability of a forced CEO turnover, as well as the sensitivity of CEO turnover to performance. Notably, as PPD increases by one standard deviation from its mean level, we observe an approximate 30% increase in CEO turnover‐performance sensitivity. These findings confirm a higher likelihood of replacing underperforming CEOs in firms with a politically powerful board. Our results also highlight that a higher proportion of either independent or female directors alone does not guarantee effective monitoring. The key lies in ensuring that these directors possess stronger political power than the CEO.
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Hertzel, Michael G., and Hong Zhao. "Why Do Boards Let Their CEOs Take Outside Directorships? Entrenchment and Embeddedness." SSRN Electronic Journal, 2019. http://dx.doi.org/10.2139/ssrn.3478517.
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Blackburne, Terrence P., and Phillip J. Quinn. "Disclosure Speed: Evidence from Nonpublic SEC Investigations." Accounting Review, May 24, 2022. http://dx.doi.org/10.2308/tar-2019-0407.
Abstract:
We examine cross-sectional variation in disclosure speed by using data that allow us to measure when managers learn of SEC investigations and the time lag until subsequent disclosures. We document that external monitoring and litigation risk are associated with 99% and 39% faster disclosure, and managerial entrenchment with 28% slower disclosure. When revelations by external parties preempt managers’ disclosures, we observe a significant increase in bid-ask spreads that persists for at least three years following the close of the investigation and a higher likelihood of turnover for less entrenched CEOs. We also document that firms whose managers disclose investigations are subject to fewer subsequent securities class action lawsuits. Our results are consistent with managers balancing the costs of fast disclosure, including immediate stock price declines and potential reputational costs, with the risks of having external parties leak news of SEC investigations.
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Khosasi, Steven, and Rizky Eriandani. "CORPORATE SOCIAL RESPONSIBILITY DAN EARNINGS MANAGEMENT: MANAGERIAL ENTRENCHMENT SEBAGAI VARIABEL MODERASI." JIAFE (Jurnal Ilmiah Akuntansi Fakultas Ekonomi) 07, no. 01 (June 30, 2021). http://dx.doi.org/10.34204/jiafe.v7i1.2869.
Abstract:
Abstrak: Penelitian ini bertujuan menguji pengaruh managerial entrenchment terhadap hubungan tanggung jawab sosial perusahaan (CSR) dengan praktik manajemen laba. Data yang digunakan adalah semua perusahaan sektor manufaktur yang terdaftar di BEI periode 2016-2018. Proksi yang digunakan untuk mengukur managerial entrenchment adalah kepemilikan saham CEO dan masa jabatan CEO. Pengolahan data menggunakan moderated regression analysis. Hasil penelitian yang diperoleh menyatakan bahwa tanggungjawab sosial perusahaan berpengaruh negatif terhadap manajemen laba, sedangkan masa jabatan CEO dan kepemilikan saham CEO tidak memberikan pengaruh terhadap hubungan tanggung jawab sosial perusahaan dengan manajemen laba. Selain itu, pada penelitian ini juga menemukan bahwa masa jabatan CEO memiliki pengaruh yang signifikan terhadap kesenjangan tanggung jawab sosial perusahaan. Penelitian ini memberikan implikasi bahwa walaupun managerial entrenchment tidak merusak hubungan CSR dan tindakan manajemen laba, namun managerial entrenchment menentukan jenis aktifitas CSR yang dilakukan perusahaan. Abstract: This study aims to examine the effect of managerial entrenchment on the relationship between corporate social responsibility (CSR) and earnings management practices. The data used are all manufacturing sector companies listed on the IDX for the 2016-2018 period. The proxies used to measure managerial entrenchment are CEO's share ownership and CEO's tenure. Data processing using moderated regression analysis. The results obtained indicate that corporate social responsibility harms earnings management. At the same time, the tenure of the CEO and CEO's share ownership does not affect the relationship between corporate social responsibility and earnings management. In addition, this study also found that CEO tenure has a significant influence on the corporate social responsibility gap. This study implies that although managerial entrenchment does not damage the relationship between CSR and earnings management actions, managerial entrenchment determines the company's types of CSR activities.
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Baxamusa, Mufaddal H. "Separating the Incentive and Entrenchment Effects from CEO'S Equity Holdings." SSRN Electronic Journal, 2009. http://dx.doi.org/10.2139/ssrn.1328029.