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Corporate Social Responsability and Managerial Entrenchment

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  • Giovanni Cespa
  • Giacinta Cestone

Abstract

When stakeholder protection is left to the voluntary initiative of managers, relations with social activists may become an effective entrenchment strategy for inefficient CEOs. We thus argue that managerial turnover and firm value are increased by the institutionalization of stakeholder protection depriving incumbent CEOs of activists' support. This finding provides a rationale for the emergence of specialized institutions (social auditors and ethic indexes) that help firms commit to stakeholder protection even in case of managerial replacement. Our theory also explains a recent trend whereby social activist organizations and institutional shareholders are showing a growing support for each others' agenda.

Suggested Citation

  • Giovanni Cespa & Giacinta Cestone, 2004. "Corporate Social Responsability and Managerial Entrenchment," Working Papers 139, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:139
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    References listed on IDEAS

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    More about this item

    Keywords

    Corporate Governance; Corporate Social Responsability; Managerial Entrenchment; Social Activism; Stakeholders;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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