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1 – 10 of 391Runhui 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.
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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…
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.
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This paper aims to examine the relation between managerial ability and stock price crash risk, conditional on managerial overconfidence. In addition, conditional on managerial…
Abstract
Purpose
This paper aims to examine the relation between managerial ability and stock price crash risk, conditional on managerial overconfidence. In addition, conditional on managerial overconfidence, the authors investigate the effect of managerial ability on firms’ choice of bad news hoarding channels, which result in a stock price crash.
Design/methodology/approach
Using a sample of 24,289 firm-years from companies listed on Compustat and CRSP from 1994 to 2018, the authors conduct panel regression analysis.
Findings
The authors find that managerial ability is positively associated with stock price crash risk only when managerial overconfidence is high. Furthermore, the authors find that managerial ability seems to exacerbate (attenuate) the bad news withholding by the overconfident managers using the earnings guidance (earnings management) channel. The authors find limited evidence that high-ability managers are likely to withhold bad news through the overinvestment channel and “other channels” when managers are overconfident. Finally, the authors find that the joint effect of managerial overconfidence and managerial ability on firms’ crash risk is more pronounced when there is a material weakness in firms’ internal controls, high investor belief heterogeneity and high information asymmetry. However, this effect appears to dissipate during the recent financial crisis in 2008.
Originality/value
This research reveals that managerial ability is costly to firms by engendering bad news hoardings and stock price crash risk when managers are overconfident. It also sheds light on how managerial overconfidence and managerial ability affect managers’ choice of bad news withholding channels and stock price crash risk. Finally, the paper is of practical value to the board of directors in selecting the prospective executives.
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Ning Liu, Linyu Zhou, LiPing Xu and Shuwei Xiang
As the cost of completing a transaction, the green merger and acquisition (M&A) premium paid on mergers can influence whether the acquisition creates value or not. However…
Abstract
Purpose
As the cost of completing a transaction, the green merger and acquisition (M&A) premium paid on mergers can influence whether the acquisition creates value or not. However, studies linking M&A premiums to firm value have had mixed results, even fewer studies have examined the effect of green M&A premiums on bidders’ firm value. The purpose of this paper is to investigate whether and how green M&A premiums affect firm value in the context of China’s heavy polluters.
Design/methodology/approach
Using 323 deals between 2008 and 2019 among China’s heavy polluters, this paper estimates with correlation analysis and multiple regression analysis.
Findings
Green M&A premiums are negatively associated with firm value. The results are more significant when firms adopt symbolic rather than substantive corporate social responsibility (CSR) strategies. Robustness and endogeneity tests corroborate the findings. The negative relation is stronger when acquiring firms have low governmental subsidy and environmental regulation, when firms have overconfident management, when firms are state-owned and when green M&A occurs locally or among provinces in the same region. This study also analyzes agency cost as an intermediary in the relationship between green M&A premium and firm value, which lends support to the agency-view hypothesis.
Originality/value
This study provides systemic evidence that green M&A premiums damage firm value through agency cost channel and the choice of CSR strategies from the perspective of acquirers. These findings enrich the literature on both the economic consequences of green M&A premiums and the determinants of firm value and provide a plausible explanation for mixed findings on the relationship between green M&A premiums and firm value.
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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.
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Faten Ben Ahmed and Anis Jarboui
The purpose of this paper is to focus on the moderating effect of CEO's accounting-based attributes on the relationship between chief executive officer (CEO) overconfidence and…
Abstract
Purpose
The purpose of this paper is to focus on the moderating effect of CEO's accounting-based attributes on the relationship between chief executive officer (CEO) overconfidence and forecast accuracy in European companies.
Design/methodology/approach
Data from a sample of 347 European firms listed on Stoxx Europe 600 index from 2005 to 2018 are used to test the moderation model using moderation regression analysis.
Findings
Evidence reveals that CEO overconfidence is negatively associated with forecast accuracy. Further, CEO's accounting-based attributes significantly moderates the impact of CEO overconfidence on forecast quality.
Originality/value
This study is unique in providing European evidence for the moderating effect of CEO's accounting-based attributes on the relationship between CEO overconfidence and forecast quality. This paper is also relevant as it addresses the interaction between two sciences (psychology) to explain the forecast accuracy (accounting).
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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 of…
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.
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Wafa Jilani, Jamel Chouaibi and Ahmed Kouki
The main purpose of this paper is to look at the link between chief executive officer (CEO) behavior and corporate social responsibility (CSR) engagement with the moderating role…
Abstract
Purpose
The main purpose of this paper is to look at the link between chief executive officer (CEO) behavior and corporate social responsibility (CSR) engagement with the moderating role of bank risk-taking behavior.
Design/methodology/approach
Based on a 13-year data set (2007–2019), the authors applied the feasible generalized least squares with panel data to test the hypotheses.
Findings
The findings reveal a positive and significant link between CEO behavior and CSR engagement. Based on these findings, it can be argued that the characteristics of the CEO of the banks would improve the CSR strategies. Furthermore, the study suggests a moderating effect of bank risk-taking in the link between psychological bias and corporate social responsibility engagement (CSR engagement).
Practical implications
As CEO behavioral characteristics are essential to understanding CSR practice, boards of directors should consider the behavioral traits of dominant and overconfident CEOs while designing CSR practices.
Social implications
If the bank behaves in a socially responsible manner, direct and indirect stakeholders may be able to evaluate the level of risk-taking in more detail.
Originality/value
This research highlights the importance of CEO behavior characteristics for CSR, which is a crucial application that supports the upper echelons theory; and fills a gap in literature research. It is one of the few studies examining the interaction between risk-taking, CEO behavior and CSR engagement.
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Bowon Kim and Jaeseog Na
This study examines whether the behavioral attributes, such as overconfidence, of chief executive officers (CEO) and chief operating officers (COO) affect firm's inventory…
Abstract
Purpose
This study examines whether the behavioral attributes, such as overconfidence, of chief executive officers (CEO) and chief operating officers (COO) affect firm's inventory leanness. If they do, how are they interacting with each other? Moreover, incorporating market competition into the analysis, this study explores how the competition moderates the relationship between managerial overconfidence and inventory leanness.
Design/methodology/approach
Using a large panel data of US manufacturing firms between 1998 and 2015, this study measures top managers' overconfident characteristics using stock option information. Then, a panel regression analysis is adopted to test the effects of managerial overconfidence on inventory leanness. Moreover, a moderation model is applied to investigate the interaction effects of market competition.
Findings
Firms with overconfident COOs (CEOs), other circumstances being equal, increase (decrease) the inventory leanness as the market becomes more competitive.
Practical implications
The study suggests that firms should understand top managers' behavioral characteristics to manage inventory efficiently. Collectively, CEOs (COOs) tend to increase (decrease) inventory levels due to their overconfidence as the market gets competitive. Firms should establish a systematic process to be reviewed by diverse stakeholders to deal with managerial overconfidence.
Originality/value
This study is an exploratory study that examines whether and how top management's behavioral attribute relates to a firm's operations performance. It underlines that CEO and COO's overconfident characteristics determine the inventory leanness when market competition is considered. Numerous studies on firm-level strategies emphasized the top managers' overconfidence as a key factor. However, behavioral characteristics at the top management level have rarely been studied in operations management fields. Based on the results, scholars could compare and understand the effects of CEO and COO overconfidence to provide insights into inventory management.
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James Juichia Lin, Edward M. Werner and Ya-Chi Huang
This chapter investigates how market competition relates to firm corporate social responsibility (CSR) investment strategy. Using separate measures to capture different dimensions…
Abstract
This chapter investigates how market competition relates to firm corporate social responsibility (CSR) investment strategy. Using separate measures to capture different dimensions of competition, we find that firms are likely to invest more (less) in socially responsible initiatives when competition from existing rivals (potential entrants) is high. We also find that industry leaders are more likely to engage in more CSR when higher levels of competition exist, while followers primarily choose to strengthen other aspects of their competitiveness instead. Finally, analyzing the impact of CEO overconfidence on CSR engagement, our study finds novel evidence suggesting that firms with overconfident CEOs tend to underestimate the intensity of competition and are less sensitive to the impact of market competition on CSR engagement, relative to rational CEOs.
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