Managerial entrenchment and the effectiveness of internal governance mechanisms

Abstract

Founder CEOs of poorly performing firms are less likely to be replaced than non founders. Furthermore, founder CEO firms are much more prevalent in our sample of poor performing firms than in the general population. We also report that simply replacing a founder CEO is not sufficient to increase long-term stock returns unless the founder leaves both the firm and the board. In addition founder CEO firms are less likely than non founder CEO firms to: (i) replace the CEO with a financier; (ii) experience financial distress; (iii) file for bankruptcy; (iv) restructure assets; or (v) be targeted for takeover.

Citation

McNabb, M.M. and Martin, J.D. (2002), "Managerial entrenchment and the effectiveness of internal governance mechanisms", Research in Finance (Research in Finance, Vol. 19), Emerald Group Publishing Limited, Leeds, pp. 29-59. https://doi.org/10.1016/S0196-3821(02)19003-4