Document Type
Article
Language
eng
Format of Original
26 p.
Publication Date
9-2007
Publisher
Elsevier
Source Publication
Journal of Corporate Finance
Source ISSN
0929-1199
Abstract
This paper investigates the influence of managerial entrenchment on private placements by examining the firm's decision to appoint representatives of the private investors to the board without shareholder approval. By analyzing a sample of U.S. firms that appoint directors in combination with private offerings between 1995 and 2000, we find that firms with greater managerial entrenchment are more likely to bypass shareholder approval. Firms that bypass shareholders are less likely to appoint independent directors or to elect one of these directors as chairman. We also show that the market reacts more positively to the private offering announcement when the firm submits its board candidates for shareholder approval. Further, firms that bypass approval underperform compared to firms that obtain it. Overall our findings suggest that managers avoid shareholder approval to perpetuate entrenchment.
Recommended Citation
Arena, Matteo and Ferris, Stephen P., "When Managers Bypass Shareholder Approval of Board Appointments: Evidence from the Private Security Market" (2007). Finance Faculty Research and Publications. 12.
https://epublications.marquette.edu/fin_fac/12
Comments
Accepted version. Journal of Corporate Finance, Vol. 13, No. 4 (September 2007): 485-510. DOI. © 2007 Elsevier. Used with permission.
NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Corporate Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Corporate Finance, [VOL 13, ISSUE 14, September 2007] DOI.