Measuring management insulation from shareholder pressure

Ferreira, Daniel, Kershaw, David, Kirchmaier, Tom and Schuster, Edmund (2016) Measuring management insulation from shareholder pressure. LSE Law, Society and Economy Working Paper Series, Working Paper No. 01/2016. London School of Economics and Political Science, Department of Law, London, UK.

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Abstract

We propose a management insulation measure based on charter, bylaw, and corporate law provisions that make it difficult for shareholders to oust a firm’s management. Unlike the existing alternatives, our measure considers the interactions between different provisions. We illustrate the usefulness of our measure with an application to the banking industry. We find that banks in which managers were more insulated from shareholders in 2003 were significantly less likely to be bailed out in 2008/09. These banks were also less likely to be targeted by activist shareholders, as proxied by 13D SEC filings. By contrast, popular alternative measures of insulation -- such as staggered boards and the Entrenchment Index -- fail to predict both bailouts and shareholder activism.

Item Type:	Monograph (Working Paper)
Official URL:	http://papers.ssrn.com/
Additional Information:	© 2016 The Authors
Library of Congress subject classification:	H Social Sciences > HJ Public Finance
Sets:	Departments > Law Research centres and groups > Financial Markets Group (FMG)
Identification Number:	Working Paper No. 01/2016
Project and Funder Information:	Project ID Funder Name Funder ID UNSPECIFIED Law and Financial Markets Project UNSPECIFIED UNSPECIFIED AXA Research Fund http://dx.doi.org/10.13039/501100001961
Date Deposited:	20 May 2016 13:57
URL:	http://eprints.lse.ac.uk/66566/

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