ABSTRACT
We investigate how powerful chief executive officers (CEOs) adopt antitakeover provisions (ATPs). Prior studies indicate that CEOs adopt ATPs to increase their private benefits and job security. However, our evidence reveals a nonmonotonic relationship between CEO power and ATPs. Specifically, relatively less powerful CEOs adopt more ATPs, supporting the managerial entrenchment hypothesis. However, when CEOs become sufficiently powerful, they adopt fewer ATPs, supporting the quiet life hypothesis. Overall, our findings support the notion that a simple linear relationship does not explain the effect of CEO power.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 Our dataset ends in 2007 considering data availability for the ATP variables in the ISS database. E-INDEX is based on the Legacy version of ISS because it changed its data collection in 2007 after acquiring the IRRC in 2005.
2 Following Bebchuk, Cohen, and Ferrell (Citation2009), we adopt the prior year’s value to complete the missing data for some firm-years.
3 The degree of CPS selected by firms can be non-random.
4 The remaining firm-year observations were used as the control group.
5 In untabulated tests, we re-estimate the probit regressions with the matched samples. All coefficients are statistically insignificant, verifying that the observable differences in firm characteristics was removed successfully.