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.
| Original language | English |
|---|---|
| Pages (from-to) | 2500-2529 |
| Number of pages | 30 |
| Journal | Journal of Financial and Quantitative Analysis |
| Volume | 55 |
| Issue number | 8 |
| Early online date | 3 Sept 2019 |
| DOIs | |
| Publication status | Published - Dec 2020 |
Funding
We are grateful to an anonymous referee, Thorsten Beck, Hendrik Bessembinder (the editor), Thomas Chemmanur, Craig Doidge, Stuart L. Gillan, Marcin Kacperczyk, Jun-Koo Kang, Patrick Kelly, Ross Levine, Craig Lewis, Thomas Schmid, Frank Song, Sheridan Titman, Junbo Wang, Hong Zou, and seminar participants at the Vanderbilt University Owen Graduate School of Management, Tsinghua University PBC School of Finance, Peking University Guanghua School of Management, and New Economic School for their helpful comments and suggestions. Lin acknowledges financial support from the National Natural Science Foundation of China (no. 71790601).