Managerial Entrenchment and Capital Structure Decision: A Case of Nepal
AbstractThis paper tests the influence of managerial entrenchment and capital structure decisions using Nepalese firms' data and executives view. A majority of earlier studies show that firm leverage is negatively associated with the degree of entrenchment of managers. This study examines whether or not this is consistent in the context of Nepal. The data were taken from top listed companies on NEPSE, pharmaceuticals companies registered in Department of Drug Administration and other non-listed companies. To achieve the objective of the study, a descriptive and causal comparative research design has been administered. The managerial entrenchment index has been calculated using Principal Component Analysis. The major finding of the study shows that the managerial entrenchment increases as the percentage of CEO ownership rises. There exists positive association of managerial entrenchment and CEO percent ownership which suggests that increase in equity holding by CEO or top executives leads to lower shareholder rights or higher managerial entrenchment.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Nepal Rastra Bank, Research Department in its journal NRB Economic Review.
Volume (Year): 25 (2013)
Issue (Month): 2 (October)
Managerial Entrenchment; CEO Ownership; Capital Structure;
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shleifer, Andrei & Vishny, Robert W., 1989. "Management entrenchment : The case of manager-specific investments," Journal of Financial Economics, Elsevier, vol. 25(1), pages 123-139, November.
- Randall Morck & Andrei Shleifer & Robert W. Vishny, 1989.
"Do Managerial Objectives Drive Bad Acquisitions?,"
NBER Working Papers
3000, National Bureau of Economic Research, Inc.
- Goyal, Vidhan K. & Park, Chul W., 2002. "Board leadership structure and CEO turnover," Journal of Corporate Finance, Elsevier, vol. 8(1), pages 49-66, January.
- Paul A. Gompers & Joy L. Ishii & Andrew Metrick, 2002.
"Corporate Governance and Equity Prices,"
Center for Financial Institutions Working Papers
02-32, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Aydin Ozkan, 2001. "Determinants of Capital Structure and Adjustment to Long Run Target: Evidence From UK Company Panel Data," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(1-2), pages 175-198.
- Van Thuan Nguyen & Li Xu, 2010. "The Impact of Dual Class Structure on Earnings Management Activities," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(3-4), pages 456-485.
- Yermack, David, 1996. "Higher market valuation of companies with a small board of directors," Journal of Financial Economics, Elsevier, vol. 40(2), pages 185-211, February.
- Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
- Stulz, ReneM., 1988. "Managerial control of voting rights : Financing policies and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 25-54, January.
- Robert C. Hanson & Moon H. Song, 2006. "Corporate Governance and Asset Sales: The Effect of Internal and External Control Mechanisms," The Financial Review, Eastern Finance Association, vol. 41(3), pages 361-386, 08.
- Friend, Irwin & Lang, Larry H P, 1988. " An Empirical Test of the Impact of Managerial Self-interest on Corporate Capital Structure," Journal of Finance, American Finance Association, vol. 43(2), pages 271-81, June.
- Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April.
- K. J. Martijn Cremers & Vinay B. Nair, 2005. "Governance Mechanisms and Equity Prices," Journal of Finance, American Finance Association, vol. 60(6), pages 2859-2894, December.
- Yoshikawa, Toru & Phan, Phillip H., 2003. "The Performance Implications of Ownership-driven Governance Reform," European Management Journal, Elsevier, vol. 21(6), pages 698-706, December.
- Berger, Philip G & Ofek, Eli & Yermack, David L, 1997.
" Managerial Entrenchment and Capital Structure Decisions,"
Journal of Finance,
American Finance Association, vol. 52(4), pages 1411-38, September.
- Philip E. Berger & Eli Ofek & David Yermack, 1996. "Managerial Entrenchment and Capital Structure Decisions," New York University, Leonard N. Stern School Finance Department Working Paper Seires 96-14, New York University, Leonard N. Stern School of Business-.
- Chen, Xiaoying (Cindy) & Yur-Austin, Jasmine, 2007. "Re-measuring agency costs: The effectiveness of blockholders," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(5), pages 588-601, December.
- Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
- Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March.
- Lucian Bebchuk & Alma Cohen & Allen Ferrell, 2009. "What Matters in Corporate Governance?," Review of Financial Studies, Society for Financial Studies, vol. 22(2), pages 783-827, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dr. Bishnu Prasad Gautam).
If references are entirely missing, you can add them using this form.