Does managerial entrenchment matter in risk taking? Evidence from the Tunisian context

Abstract

Building on agency and prospect theory views, many researchers have analyzed the executive risk-taking behavior. They have usually put in evidence the role of the mechanisms of corporate governance. In this research, we try to point out that even managerial entrenchment does matter. We consider the non financial firms that are listed in the Tunisian Stock exchange during the 1996 - 2006 period. To reveal the managerial risk taking, we apply factor analysis so as to construct a global index. To find out the impact of managerial entrenchment on risk-taking, we consider the ownership of the manager, his experience within the firm as well as his age. The size of the firm is also worth investigating while exploring managerial risk taking. The results are somewhat robust to different specifications. They may enhance and extend the agency-based corporate governance literature on executive risk-taking. But above all, they may shed some light on the emerging markets context namely the Tunisian one.