Management entrenchment

There are a variety of entrenchment practices that managers may employ, such as poison pills, super majority amendments, anti-takeover devices, or the so-called golden parachutes.

[4] There are associations between managerial entrenchment and capital structure decisions which mostly result on the fact that CEOs are reluctant to go into debt when funding an investment.

[10] Cross-sectional studies suggest that there is low leverage on firms where the CEO has characteristics associated with entrenchment.

In a sample of target firms that levered up the most, 37 percent of the managers lost their jobs within a year of the failed takeover attempt.

[11] According to the above research, there are three possible actions managers could take to entrench themselves in association with the gearing ratio: Corporate governance essentially involves balancing the interests of the many stakeholders in a company - these include its shareholders, employees, management, customers, suppliers, financiers, government and the community.

Since credit unions lack principal-agent governance between shareholders and other members, managers already enjoy benefits and job entrenchments that are not based on their performance.

Given the theoretical predictions of Fudenberg and Tirole (1995) and the empirical research by Kanagaretnam, Lobo and Mathieu (2003) we predict that credit union managers with higher comparative levels of salary and perquisites (and limited outside opportunities) will aggressively engage in accounting manipulations when job security is threatened.

[16] Therefore, managers have three good reasons to involve and censure their accounting manipulations: Nowadays, there are several articles and essays on how to accomplish a proper entrenched management exercise without hurting shareholders, yet not abuse them–for example–when a board of directives is given the power to take corporate decisions in certain matters, where the corporation will be protected against hostile takeovers.

Nonetheless, this form of corporate governance may cause distinct reaction on shares prices, which is why entrenchment management is not an easy concept to accomplish.