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Measuring management insulation from shareholder pressure

Ferreira, Daniel, Kershaw, David, Kirchmaier, Tom ORCID: 0000-0002-8938-2206 and Schuster, Edmund-Philipp ORCID: 0000-0002-9355-535X (2016) Measuring management insulation from shareholder pressure. LSE Law, Society and Economy Working Paper Series (01/2016). Department of Law, London School of Economics and Political Science, London, UK.

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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:
Additional Information: © 2016 The Authors
Divisions: Financial Markets Group
Subjects: H Social Sciences > HJ Public Finance
Date Deposited: 20 May 2016 13:57
Last Modified: 16 May 2024 12:09
Funders: Law and Financial Markets Project, AXA Research Fund

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