Liquidation threat: Behavior of CEO entrenchment

Chien Chiang Lee, Chih Wei Wang

Research output: Contribution to journalArticlepeer-review

Abstract

This study investigated the effect of CEO entrenchment on a firm's debt maturity choice. We examine US firms using the 2006–2017 sample period and find that entrenched managers choose debt with longer maturity financing to avoid early liquidation. Additionally, we detect a possible channel between entrenchment and debt maturity using shareholder-initiated proposals. Finally, firms with high (low) informational opacity (credit quality) will force entrenched managers to extend their debt maturity. We provide useful policy implications for shareholders and investors and new insights into CEO entrenchment, debt maturity, and shareholder-initiated proposals.

Original languageEnglish
Article number102949
JournalFinance Research Letters
Volume47
DOIs
StatePublished - Jun 2022

Keywords

  • Agency theory
  • CEO entrenchment
  • Debt maturity
  • Shareholder-initiated proposal

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