Potential effects of managers' entrenchment and shareholdings on competitiveness

Abstract

Previous studies on competitiveness have examined either broad macroeconomic factors such as financial/economic systems, infrastructure, exports and imports, and cultural/social values, or common microeconomic factors such as cost or product differentiation position, economies or scale/scope, and employee education and motivation as determinants of competitiveness. However, there is very little conceptual or theoretical literature, explicitly dealing with the influence of managers personal objectives such as power, status, perquisite seeking and risk reduction on corporate strategy and hence on firm competitiveness. This paper offers a first attempt to focus on ownership structure and management entrenchment (self-serving, risk-avoidance, and short term commitment) as the key factors that contribute to or impede firm competitiveness. Using parametric and non parametric tests on a sample of 600 Canadian listed firms, the study implications point to the influence of blockholders in reducing management waste, preventing asymmetric information, and obtaining more cash distributions in an effort to ensure efficiency and positively affect the strategic development of a firm.