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Article
Publication date: 30 June 2020

Runhui Lin, Fei Li and Adedigba Olawoyin

Overconfidence as an important psychological factor can also affect CEO’s cognitive preferences, while there are few studies about the impact of CEO’ overconfidence on the…

Abstract

Purpose

Overconfidence as an important psychological factor can also affect CEO’s cognitive preferences, while there are few studies about the impact of CEO’ overconfidence on the international expansion of companies. This paper aims to fill this gap and further discuss the moderating role of CEO’s overseas experience, CEO duality and ownership.

Design/methodology/approach

The authors focus on the Chinese context, collect 2008–2016 data from China's manufacturing industry as sample, use fixed effect model to analyse the effect of CEO overconfidence on international expansion strategy of Chinese firms.

Findings

The empirical results show that: CEO overconfidence positively promotes the degree of firm internationalization. CEO foreign experience positively affects the internationalization degree, but can restrain overconfidence thus negatively regulate this impact relationship. When duality is present, both CEO power and managerial discretion are pronounced and they exhibit a stronger effect. Firm’s equity nature will affect the relationship between CEOs' overconfidence and the degree of internationalization. Compared with private enterprises, CEOs in state-owned enterprises have limited power, therefore, this influence relationship is weaker.

Originality/value

This study has emphasized the importance of top executives' psychological characteristics on firm internationalization, which is key application and complement of upper echelons theory and fills the research gap in the literature. In this paper, the authors found the advantages of overconfidence for firms, which helps to understand the complex meaning of overconfidence. The results of moderating effect further explore the application of overconfidence in different context, which has some implications for management practice.

Details

Nankai Business Review International, vol. 11 no. 4
Type: Research Article
ISSN: 2040-8749

Keywords

Content available
Article
Publication date: 21 August 2019

Blake Rayfield and Omer Unsal

The authors study the relationship between CEO overconfidence and litigation risk by examining employee-level lawsuit data. The purpose of this paper is to better…

Abstract

Purpose

The authors study the relationship between CEO overconfidence and litigation risk by examining employee-level lawsuit data. The purpose of this paper is to better understand the executive characteristics that potentially affect the likelihood of employee litigations.

Design/methodology/approach

The authors employ a unique data set of employee lawsuits from the National Labor Relations Board – “Disposition of Unfair Labor Practice Charges” – which includes complaints, litigations and decisions. The data spans the years 2000–2014. The authors employ the option-based CEO overconfidence metric of Malmendier et al. (2011) as the primary explanatory variable.

Findings

The authors find that overconfident CEOs are less likely to be subjected to labor-related litigations. The authors document that firms with overconfident CEOs have fewer lawsuits opened by both labor unions and individuals. The authors then investigate the effect of employee litigations on firm performance to understand why overconfident CEOs are less prominent among lawsuits. The authors show that litigations lower corporate investment and value of capital expenditures for responsible firms, which may limit overconfident CEOs’ ability to invest. Therefore, the results may reveal the fact that overconfident CEOs may prefer to align with the interest of their employees to avoid reduced investment opportunities.

Originality/value

The paper makes three main contributions. First, it provides the first large-sample evidence on CEO overconfidence and labor relations. The authors employ data on firm-level labor litigation that contains both the case reason and case outcome. Second, this paper adds to the growing literature of CEO overconfidence and governance practices in the workplace. Finally, the study highlights the importance of employee treatment and explores the impact of labor lawsuits on firm value.

Details

Review of Behavioral Finance, vol. 11 no. 4
Type: Research Article
ISSN: 1940-5979

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Article
Publication date: 7 August 2017

Rateb Mohammmad Alqatamin, Zakaria Ali Aribi and Thankom Arun

This study aims to examine the effect of CEO’s personal characteristics on earnings management (EM) practices.

Abstract

Purpose

This study aims to examine the effect of CEO’s personal characteristics on earnings management (EM) practices.

Design/methodology/approach

The authors use panel data for 201 non-financial companies listed on the Amman Stock Exchange (ASE) for the period 2008-2013. The authors use random effect models to test the hypothesis of this study and extent the analysis to family versus non-family.

Findings

The study finds a positive relation between CEO’s overconfidence and EM practices in Jordan. Moreover, the findings reveal that managers in family companies are more likely to engage in EM practices than non-family companies. The findings shed more light on the intricate relationship between CEO’s characteristics, the decision-making process and financial reporting.

Practical implications

Results of this study could be beneficial for a number of users of financial information such as investors, auditors, regulators, lenders, as well other players in the capital market to make right decisions.

Originality/value

A literature review finds that much less studies have investigated the relationship between EM practices and personal CEO characteristics (gender and overconfidence) in developing countries such as Jordan. Furthermore, no study yet has examined the influence of CEO age on EM practices. The authors extend previous literature by providing empirical evidence about effect of some personal CEO’s characteristics on EM practices.

Details

International Journal of Accounting & Information Management, vol. 25 no. 3
Type: Research Article
ISSN: 1834-7649

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Article
Publication date: 8 February 2021

Asma Bouzouitina, Mouakhar Khaireddine and Anis Jarboui

This paper aims to examine the effect of two CEO characteristics, namely, narcissism and overconfidence on corporate social responsibility (CSR) and the moderating effect…

Abstract

Purpose

This paper aims to examine the effect of two CEO characteristics, namely, narcissism and overconfidence on corporate social responsibility (CSR) and the moderating effect of corporate governance (CG) mechanisms in the UK.

Design/methodology/approach

Using a sample of 2,360 UK firms listed on the FTSE 400 index for the years 2010–2017, the feasible generalized least squares method was applied to test the hypotheses developed.

Findings

The finding argues that CEO narcissism and overconfidence positively affect CSR. In addition, this paper found that CG effectiveness moderates the CEO’s CSR behavior.

Research limitations/implications

This research is subjected to two limitations. First, this study used different measures to proxy for CEO narcissism and overconfidence. However, other measures are not included owing to the difficulty to collect data regarding these measures. Second, this study includes only CSR performance instead of all other dimensions and categories of CSR. These limitations do not change the conclusions of this research, and they may provide guidance for further investigations.

Practical implications

Given that the CEOs psychological and behavioral features are critical in understanding CSR, shareholders and boards of directors should incorporate the behavioral aspects of narcissistic and overconfident CEOs in the design of CSR strategy.

Originality/value

This study emphasizes the importance of top executives’ psychological characteristics for CSR, which is a key application and complements the “upper echelons theory” and fills the research gap in the literature. This is one of the few studies that investigate the interaction between CG, CEO profile and CSR.

Details

Society and Business Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-5680

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Article
Publication date: 29 May 2018

Ines Ben Salah Mahdi and Mouna Boujelbène Abbes

The purpose of this paper is to conduct a behavioral analysis, through overconfidence, in order to understand how this cognitive bias could affect risk taking and…

Abstract

Purpose

The purpose of this paper is to conduct a behavioral analysis, through overconfidence, in order to understand how this cognitive bias could affect risk taking and inefficiency in Islamic and conventional banks operating in the MENA region.

Design/methodology/approach

To achieve the objective, the authors considered two overconfidence proxies, namely loan growth rate and net interest margin. Using the generalized method of moments method regressions for panel data, the authors found that the two overconfidence proxies have an effect on the risk exposure and consequently on the efficiency level of Islamic and conventional banks.

Findings

In general, overconfidence bias causes excessive risk taking and the degradation of the cost efficiency level. Moreover, these effects emerge with a delay of three to four years and have implications that are not too different for both types of banks.

Originality/value

The main motivation underlying this research study is the relatively new field of behavioral finance way in treating the topic of overconfidence. The particularity of the overconfidence bias topic is its assumption that financial decisions can be influenced by cognitive biases, ignoring the fact of a predetermined risk-return calculation.

Details

Managerial Finance, vol. 44 no. 6
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 2 August 2013

Mohamed Ali Azouzi and Anis Jarboui

This paper deals with the relationship existing between the emotional aspect and decision‐making processes. More specifically, it examines the links between emotional

Abstract

Purpose

This paper deals with the relationship existing between the emotional aspect and decision‐making processes. More specifically, it examines the links between emotional intelligence, decision biases and effectiveness of the governance mechanisms. The primary purposes of this paper are to: consider emotional intelligence as new research ideas that make important contributions to society; offer suggestions for improving manuscripts submitted to Consortium for Research on Emotional Intelligence in Organizations; and discuss methods for enhancing the validity of inferences made from research.

Design/methodology/approach

The paper explains that the main cause of organization's problems is CEO emotional intelligence level. The authors use three models (linear regression and logistic binary regression) to examine this relation: every model treats the relationship between emotional intelligence and one of efficiency criteria of the board. Emotional intelligence has been measured according to Schutte et al.'s Shutte Self Report Emotional Intelligence Scale (SSREI), with a high internal validity level. The four cognitive biases have been measured by means of a questionnaire comprising several items and the selected sample was composed of some180 Tunisian executives (belonging to 60 firms).

Findings

The results revealed that the presence of a high emotional intelligence rate is not always positively correlated with the executives' suggestibility with respect to behavioural biases. They have also affirmed the existence of a complementarity relationship between emotional intelligence and the directors' board. Authors need to consider that emotion which minimizes CEO emotional biases and provides director's board effectiveness.

Research limitations/implications

This article has implications for the development of CEO emotional intelligence capacity. Also, some psychological aspects of a theoretical nature could not be wholly approached in a complete empirical way.

Practical implications

The paper pushes organizations to select managers based on their levels of emotional intelligence (apply tests of emotional intelligence in place psychometric tests). Also, it increases the validity of inferences made from research in the field.

Social implications

This paper incites governments to establish training programs aimed at the development of learning of emotional intelligence. Thus, it has important implications for enhancing the well‐being of individuals, organizations and society as a whole.

Originality/value

Actually, for the sake improving the explanatory power of a legal‐financial approach of governance, the behavioural dimension has been integrated for a more thorough analysis of the directors' board role. The authors' goal consists in highlighting the role played by emotional intelligence as a skill or tool available for the manager or controller to minimize the behavioural biases (bias of loss aversion, optimism, over‐confidence and lack of cognitive flexibility), and achieves an effective control.

Details

Corporate Governance: The international journal of business in society, vol. 13 no. 4
Type: Research Article
ISSN: 1472-0701

Keywords

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Article
Publication date: 21 September 2011

Dalia Marciukaityte and Samuel H. Szewczyk

We examine whether discretionary accruals of firms obtaining substantial external financing can be explained by managerial manipulation or managerial overoptimism. Insider…

Abstract

We examine whether discretionary accruals of firms obtaining substantial external financing can be explained by managerial manipulation or managerial overoptimism. Insider trading patterns and press releases around equity and debt financing suggest that managers are more optimistic about their firms around debt financing. Consistent with earlier studies, we find that discretionary current accruals peak when firms obtain equity financing. However, we also find that discretionary accruals peak when firms obtain debt financing. Moreover, discretionary accruals are higher for firms that rely on debt rather than on equity financing. The results are robust to controlling for firm characteristics, excluding small and distressed firms, and using alternative measures of discretionary accruals. These findings support the hypothesis that managerial overoptimism distorts financial statements of firms obtaining external financing.

Details

Review of Behavioural Finance, vol. 3 no. 2
Type: Research Article
ISSN: 1940-5979

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Article
Publication date: 1 July 2021

Amel Kouaib, Asma Bouzouitina and Anis Jarboui

This paper explores how the tension between a firm's CEO overconfidence feature and externally observable hubris attribute may determine the level of corporate…

Abstract

Purpose

This paper explores how the tension between a firm's CEO overconfidence feature and externally observable hubris attribute may determine the level of corporate sustainability performance. This work also contemplates the impact of the moderator “corporate governance practices.”

Design/methodology/approach

This study uses a sample of 658 firm-year-observations using a sample of European real estate firms indexed on Stoxx Europe 600 Index from 2006 to 2019. To test the developed hypotheses, feasible generalized least square (FGLS) regression is applied.

Findings

Findings suggest that a good corporate governance score strengthens the positive effect of the psychological bias (CEO overconfidence) on corporate sustainability performance while it fails to attenuate the negative effect of the cognitive bias (CEO hubris).

Research limitations/implications

The research provides an overview of the impact of CEO personality traits on the corporate sustainability performance level in the European real estate sup-sector. As corporate governance can have a major impact to control these traits, the authors recommend European real estate companies to improve their corporate governance practices.

Originality/value

This study contributes to the existent literature this gap with two empirical novelties: (1) providing a novel insight into sustainability involvement using a sample of European real estate sup-sector and (2) investigating the moderating effect on the link between CEO psychological and cognitive biases and sustainability performance. This study provides empirical evidence that entrenchment problems arising from CEO hubris would not be mitigated by a good corporate governance practice.

Details

Property Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0263-7472

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Article
Publication date: 25 February 2020

Shahid Ali, Junrui Zhang, Muhammad Usman, Muhammad Kaleem Khan, Farman Ullah Khan and Muhammad Abubakkar Siddique

This study aims to investigate the question concerning whether tournament incentives motivate chief executive officers (CEOs) to be socially responsible.

Abstract

Purpose

This study aims to investigate the question concerning whether tournament incentives motivate chief executive officers (CEOs) to be socially responsible.

Design/methodology/approach

Data from all A-share Chinese companies listed on the Shanghai and Shenzhen stock exchanges for the period from 2010 to 2015 are used. To draw inferences from the data, ordinary least squares (OLS) regression and cluster OLS are used as a baseline methodology. To control for the possible issue of endogeneity, firm-fixed-effects regression, two-stage least squares regression and propensity score matching are used.

Findings

A reliable evidence is found that tournament incentives motivate CEOs to be more socially responsible. Additional analysis reveals that the positive effect of CEO tournament incentives on corporate social responsibility performance (CSRP) is more pronounced in state-owned firms than it is in non-state-owned firms. The study’s findings are consistent with tournament theory and the conventional wisdom hypothesis, which proposes that better incentives lead to competitiveness, which improves financial and social performance.

Practical implications

The study’s findings have implications for companies and regulators who wish to enhance CSRP by giving tournament incentives to top managers. Investment in social responsibility may reduce the conflict between executives and employees and improve the corporate culture.

Originality/value

This study contributes to the existing literature by providing the first evidence that CEOs’ tournament incentives play a vital role in CSRP. The study’s findings contribute to tournament theory.

Details

Managerial Auditing Journal, vol. 35 no. 5
Type: Research Article
ISSN: 0268-6902

Keywords

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Article
Publication date: 8 July 2014

Kwangmin Park and SooCheong (Shawn) Jang

The purpose of this study is to present a brief overview of hospitality finance/accounting (HFA) research and to propose the utility of interdisciplinary research in the…

Abstract

Purpose

The purpose of this study is to present a brief overview of hospitality finance/accounting (HFA) research and to propose the utility of interdisciplinary research in the HFA field.

Design/methodology/approach

This study outlines HFA research and adds a brief summary of mainstream finance and accounting research topics. To further improve HFA research, this study suggests the need for interdisciplinary research that could effectively integrate finance/accounting with other management subjects in the hospitality field.

Findings

Despite its importance, interdisciplinary research has not been given enough attention in the field of HFA. This study sheds light on the need for interdisciplinary research and proposes paths for conducting interdisciplinary HFA research, such as behavioral finance, marketing-finance interface, human resource management finance/accounting, etc.

Practical implications

This study suggests that the results of interdisciplinary HFA research can provide useful practical implications from shareholder and organizational perspectives in the hospitality industry.

Originality/value

Although the interdisciplinary research concept is not really new, it has not been extensively addressed in hospitality academia. In this respect, this study suggests expanding the horizon for HFA researchers.

Details

International Journal of Contemporary Hospitality Management, vol. 26 no. 5
Type: Research Article
ISSN: 0959-6119

Keywords

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