Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
958154 | Journal of Economics and Business | 2007 | 15 Pages |
Abstract
While company stock ownership can encourage wealth-maximizing behavior among managers, we argue that ownership allows entrenchment of managers who own a large enough stake to reduce the possibility of their dismissal. We call this the manager-entrenchment hypothesis. Supporting evidence exists in our study showing that managers with a larger share ownership have a lower probability of removal, and when the removal of an executive becomes imminent, executives who accumulate additional shares decrease their likelihood of replacement. We conclude that individual managers can use large shareholdings and the purchase of additional shares to influence the mechanisms of corporate control.
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Authors
Zahid Iqbal, Dan W. French,