This paper examines the relationship between managerial entrenchment and firms' capital structures, finding that entrenched CEOs tend to avoid debt. In a cross-sectional analysis, firms with CEOs facing less pressure from ownership and compensation incentives or active monitoring have lower leverage. In an analysis of leverage changes, firms show increased leverage following events that reduce managerial security, such as unsuccessful tender offers, involuntary CEO replacements, and the addition of major stockholders to the board. The study uses agency theory to argue that managers may not always choose capital structures that maximize firm value. Entrenched managers may prefer less leverage to reduce firm risk or avoid performance pressures. Conversely, some theories suggest that entrenchment motives may lead managers to increase leverage to boost voting power or prevent takeovers. A third possibility is that managers use excess leverage as a temporary device to signal commitment to restructuring. The paper finds that firms with more entrenched CEOs have lower leverage, and that leverage increases after events that threaten managerial security. These findings support the theory that managerial entrenchment influences capital structure decisions. The study also finds that leverage increases after CEOs receive performance-based incentives, such as stock options. The paper analyzes the impact of corporate governance changes on firms' capital structures, finding that events reducing managerial security lead to increased leverage. The results suggest that managerial entrenchment has a significant influence on observed capital structures. The study also finds that firms with high market-to-book ratios tend to be more leveraged, although this result is not fully explained by the theories discussed. Overall, the paper provides empirical support for the idea that managerial entrenchment affects capital structure decisions.This paper examines the relationship between managerial entrenchment and firms' capital structures, finding that entrenched CEOs tend to avoid debt. In a cross-sectional analysis, firms with CEOs facing less pressure from ownership and compensation incentives or active monitoring have lower leverage. In an analysis of leverage changes, firms show increased leverage following events that reduce managerial security, such as unsuccessful tender offers, involuntary CEO replacements, and the addition of major stockholders to the board. The study uses agency theory to argue that managers may not always choose capital structures that maximize firm value. Entrenched managers may prefer less leverage to reduce firm risk or avoid performance pressures. Conversely, some theories suggest that entrenchment motives may lead managers to increase leverage to boost voting power or prevent takeovers. A third possibility is that managers use excess leverage as a temporary device to signal commitment to restructuring. The paper finds that firms with more entrenched CEOs have lower leverage, and that leverage increases after events that threaten managerial security. These findings support the theory that managerial entrenchment influences capital structure decisions. The study also finds that leverage increases after CEOs receive performance-based incentives, such as stock options. The paper analyzes the impact of corporate governance changes on firms' capital structures, finding that events reducing managerial security lead to increased leverage. The results suggest that managerial entrenchment has a significant influence on observed capital structures. The study also finds that firms with high market-to-book ratios tend to be more leveraged, although this result is not fully explained by the theories discussed. Overall, the paper provides empirical support for the idea that managerial entrenchment affects capital structure decisions.