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Managerial Entrenchment and Information Production

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  • Lin, Chen
  • Wei, Lai
  • Xie, Wensi

Abstract

In this article, 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.

Suggested Citation

  • Lin, Chen & Wei, Lai & Xie, Wensi, 2020. "Managerial Entrenchment and Information Production," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 55(8), pages 2500-2529, December.
    • Handle: RePEc:cup:jfinqa:v:55:y:2020:i:8:p:2500-2529_3
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    Cited by:

    1. David Bartolini & Agnese Sacchi & Domenico Scalera & Alberto Zazzaro, 2023. "Voters’ Distance, Information Bias and Politicians’ Salary," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 9(2), pages 637-664, July.
    2. Ng, Jeffrey & Wu, Hong & Zhai, Weihuan & Zhao, Jing, 2021. "The effect of shareholder activism on earnings management: Evidence from shareholder proposals11We appreciate the helpful comments and suggestions from Stephen Taylor, Gary Biddle, Santosh Ramalingego," Journal of Corporate Finance, Elsevier, vol. 69(C).

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