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Managerial Entrenchment and Corporate Social Performance


  • They wish to thank Carlos Bendito, Managing Director of Analistas Internacionales en Sostenibilidad (AISTM) – a Sustainable Investment Research International Company partner firm based in Spain – for their helpful comments and access to the SiRi Pro™ database. They would also like to thank Martin Walker (editor), Diego Prior, Stathopoulos Konstantinos, Joan Santaló and one of the anonymous referees as well as participants at the JBFA Capital Markets Conference (Chapel Hill, 2007), the Academy of Management Annual Meeting (Philadelphia, 2007), the Symposium of Corporate Governance & Shareholder Activism (Milan, 2007), the Journal of Banking and Finance 30th Anniversary Conference (Beijing, 2006), the Strategic Management Conference (Vienna, 2006), the Foro de Finanzas (Castellon, 2006) and the seminar participants at Universitat Autònoma of Barcelona for their useful comments on earlier drafts of this paper. They also acknowledge the financial support of the Ministerio de Ciencia y Tecnologia (grant #SEC2003-03797), Ministerio de Educación y Ciencia (grant # SEJ2004-07877-C02-02 and grant #SEJ2006-09401), and the Comunidad de Madrid (Grant #s-0505/tic/000230). The usual disclaimers apply.

* Address for correspondence: Josep A. Tribó, Universidad Carlos III de Madrid, Department of Business Administration, Calle Madrid, 126, Getafe (Madrid), Spain 28903.


Abstract:  We examine empirically the relationships amongst managerial entrenchment practices, social performance, and financial performance. We hypothesize that entrenched managers may collude with non-shareholder stakeholders in order to reinforce their entrenchment strategy; this is particularly so in firms that have efficient internal control mechanisms. Moreover, we prove that the combination of entrenchment strategies and the implementation of socially responsible actions have particularly negative effects on financial performance. We test these contentions with a sample of 358 companies, from 22 different countries, for the period 2002–2005.