MANAGERIAL ENTRENCHMENT: SCALE VALIDATION

Objective: This work focused on the influence of managerial entrenchment on investment decisions. The objective was to understand the main characteristics of this variable in order to develop an instrument that could measure it.. Theoretical Framework: The decision-making process in finance is influenced by several factors related to the decision maker, such as their psychological and cognitive biases, their risk tolerance, and even their intentions to entrench themselves in the management of a company. Behavioral finance began to address the complexity of the decision-making process, starting from the complexity of the individual themself, displacing the idea of the pragmatic decision of Homo economicus that traditional theory represented Method: A questionnaire was developed and applied to a sample of 154 managers. Then, the instrument was subjected to an exploratory factor analysis and a reliability test. Results and Discussion: The findings of this research pointed to three components for measuring managerial entrenchment. These components were called “Managers’ Decision Autonomy”, “Power Hierarchies” and “Freedom of action” in the use of the organization’s financial resources. As a result, the instrument was validated, which was found to be capable of measuring entrenchment with consistent reliability. Research Implications: The practical and theoretical implications of this research are discussed, providing insights into how the results can be applied or measured management entrenchment practices in investment decision-making. Originality/Value: Thus, this qualitative study contributes both to the finance literature by summarizing the main characteristics of managerial entrenchment and to behavioral finance studies by providing a validation instrument for one of its main subjects of study.