The mediation effect of Firm Profitability for the Relationship between Managerial Entrenchment and Firm Value: An Empirical Study

نوع المستند : تجاریة کل ما یتعلق بالعلوم التجاریة

المؤلفون

1 Faculty of Commerce, zagazig University

2 Faculty of Commerce, Zagazig University

المستخلص

The previous studies about the relationship between managerial entrenchment and firm value are indecisive as these studies implicitly presume that the relationship between managerial entrenchment and firm value is a direct relation. The point that has received less attention in the existing literature is that the relationship between managerial entrenchment and firm value can be mediated by a contextual variable which has a direct relation with firm value such as firm profitability. The purpose of this paper is to investigate the direct effect of the managerial entrenchment on firm value and identifies the mediation effect of firm profitability on the relationship between managerial entrenchment and firm value. To test the study hypotheses, the researcher relied on a sample of 113 Egyptian listed corporation (678 observations) and belonging to 13 non-financial sectors over the period from 2014 to 2019. Using path analysis model, the results show that there is a negative and significant relationship between managerial entrenchment and firm value. And also reveal that there is a positive and significant relationship between managerial entrenchment and firm profitability and a negative and insignificant relationship between firm profitability and firm value. And these results assure that there is no mediation effect of firm profitability on the relationship between managerial entrenchment and firm value. Here, adopting earnings management by the managers may be the reason for the absence of the indirect relationship between managerial entrenchment and firm value.

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