Managerial entrenchment and corporate bond financing: evidence from Japan

Abstract

This article investigates whether managerial entrenchment of controlling shareholders affects corporate bond financing. Using data on Japanese manufacturing firms, we find that firms with large corporate shareholders as controlling shareholders issue less straight corporate bonds than other firms. The results show that managerial entrenchment of controlling shareholders has an influential impact on corporate bond financing.

Acknowledgements

I thank Kazuo Ogawa for valuable comments and suggestions. The usual disclaimer applies.

Notes

¹ Xu (2006) documents that hostile takeover activities in Japan increased drastically from January 2000.

² Kang and Liu (2007) document that bond issues of firms closely affiliated with banks are more likely to be underwritten by banks.

³ Extreme observations are defined as those for which any one of the variables has a value more than 4 SD away from the mean value.

⁴ The negative correlation between them may suggest that financial institutions tend not to have shares of firms with large corporate shareholders (Barucci and Mattesini, 2008).

⁵ In columns 2 and 3, we obtain similar results when financial institution ownership is not included.