Managerial Entrenchment, Ownership Structure and Diversifying Acquisition : Evidence from China

This paper tests the impact of managerial entrenchment on diversifying acquisition and the governance effect of ownership structure by Chinese A-share listed companies. We developed an entrenchment index based on three categories: human capital characteristics, the incentives of companies, and constraint provisions. We find that managerial entrenchment has a significantly positive impact on diversifying acquisition, indicating that entrenchment is one of the reasons for the anomalies of diversifying acquisitions by Chinese listed companies. Ownership concentration and institutional shareholding negatively adjust the above positive correlation, showing a significant governance effect of ownership structure