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Article
Publication date: 4 June 2020

Ly Thi Hai Tran, Thoa Thi Kim Tu and Thao Thi Phuong Hoang

This paper examines the effects of managerial optimism on corporate cash holdings.

Abstract

Purpose

This paper examines the effects of managerial optimism on corporate cash holdings.

Design/methodology/approach

The authors construct a novel measure of managerial optimism based on the linguistic tone of annual reports by applying a Naïve Bayesian Machine Learning algorithm to non-numeric parts of Vietnamese listed firms' reports from 2010 to 2016. The paper employs firm and year fixed effects model and also uses the generalized method of moments estimation as robustness checks.

Findings

The authors find that the cash holding of firms managed by optimistic managers is higher than the cash holdings of firms managed by non-optimistic managers. Managerial optimism also influences corporate cash holdings through internal cash flows and the current year’s capital expenditures. Although the authors find no evidence that optimistic managers hold more cash to finance future growth opportunities in general, optimistic managers hold more cash for near future investment opportunities than non-optimistic managers do.

Research limitations/implications

The novel measure proposed in this study is expected to provide great potential for future finance studies investigating the relation between managerial traits and corporate policies since it is applicable for any levels of financial market development. In addition, the findings highlight the important role, both direct and indirect, of managerial optimism on cash holdings. Related future research should take this psychological trait into account to gain a better understanding of corporate cash holding.

Originality/value

This paper helps to extend the literature on managerial optimism measurement by introducing a new measure of managerial optimism based on the linguistic tone of annual reports. Furthermore, this is among the first studies directly linking annual report linguistic tone to cash holding. The paper also provides new evidence regarding how managerial optimism affects the relationship between the firm's growth opportunities and cash holding, given that mispricing corrections are naturally uncertain.

Details

International Journal of Managerial Finance, vol. 17 no. 2
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 15 August 2016

Vivien E. Jancenelle, Susan F. Storrud-Barnes, Anthony L Iaquinto and Dominic Buccieri

The purpose of this paper is to focus on investor reactions to unanticipated changes in income, and whether those reactions can be mitigated by managerial discussion. The…

Abstract

Purpose

The purpose of this paper is to focus on investor reactions to unanticipated changes in income, and whether those reactions can be mitigated by managerial discussion. The authors investigate how top-management team certainty and optimism during post-earnings announcement conference calls can serve as corrective actions and add back firm value in times of unexpected changes in firm-specific risk.

Design/methodology/approach

The research question is tested empirically in the context of large, publicly traded, US firms’ quarterly earnings announcements, and their subsequent post-earnings announcement conference calls. The authors use the advanced content analysis software DICTION to measure the levels of managerial certainty and optimism displayed during post-earnings announcement conference calls, and event-study methodology to measure investors’ reactions.

Findings

Results indicate that earnings surprises are negatively associated with firm value, but that this relationship is mitigated positively by displays of managerial certainty and optimism during post-earnings announcement conference calls.

Originality/value

This work uses an innovative research design to study top-management team rhetoric in post-earnings announcement conference calls, and how specific discussions mitigate investors’ negative reactions to increases in firm-specific risk. The study highlights the importance of top-management team certainty and optimism for value creation in times of change in firm-specific risk, and the importance of rhetoric as a tool for corrective action.

Details

Journal of Strategy and Management, vol. 9 no. 3
Type: Research Article
ISSN: 1755-425X

Keywords

Book part
Publication date: 12 September 2022

Bill B. Francis, Iftekhar Hasan and Gokhan Yilmaz

This chapter investigates whether core competence of managers and their expansive (vs. specialized) managerial style affects firms' innovative ability, capacity, and…

Abstract

This chapter investigates whether core competence of managers and their expansive (vs. specialized) managerial style affects firms' innovative ability, capacity, and efficiency. Using exogenous CEO departures as a natural experiment, it establishes a causal link between managerial capability and innovation. Importantly, it reveals that firms with talented managers receive significantly more nonself citations; make significantly lower self-citations and lesser citations to the others, indicating novel and explorative innovation achievements. Also, managers with higher general (specialized) ability are cited more (less) by patents from a wider range of fields. Lastly, career concern is identified as a mechanism linking higher ability and innovation.

Details

Empirical Research in Banking and Corporate Finance
Type: Book
ISBN: 978-1-78973-397-6

Keywords

Article
Publication date: 9 June 2020

Hend Monjed and Salma Ibrahim

Evidence on whether firms with higher risk choose a more transparent or more opaque risk reporting strategy in their annual reports is mixed. A potential explanation is…

Abstract

Purpose

Evidence on whether firms with higher risk choose a more transparent or more opaque risk reporting strategy in their annual reports is mixed. A potential explanation is that firms choose an alternative reporting strategy to risk disclosure, namely income smoothing. The purpose of this paper is to investigate the association between both strategies in relation to firm risk levels.

Design/methodology/approach

The authors use a balanced sample of 74 non-financial UK firms from the FTSE100 index over the period 2005–2015, examining the association between firm risk measures and both risk disclosure and income smoothing using a seemingly unrelated regression methodology.

Findings

The authors find that firm financial risk measures are positively associated with both risk disclosure and income smoothing, implying a complementary association. Furthermore, non-risk-related factors are associated with both lower levels of risk disclosure and higher income smoothing, implying a substitutive effect.

Research limitations/implications

The authors do not consider other factors such as managerial optimism, managerial financial incentives and analysts' earnings forecasts which might influence the association between risk disclosure and income smoothing, and hence, this may be a limitation of the current study.

Practical implications

These results are important to regulators, investors and boards of directors who are interested in understanding the alternative reporting strategies that managers select when faced with high risk. The findings signal a need for closer regulatory scrutiny on not only the level of risk disclosure but also the financial reporting choices.

Originality/value

The authors extend the literature on the reporting versus recognition decisions made by managers.

Details

Journal of Applied Accounting Research, vol. 21 no. 3
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 1 July 2011

Jiang Wei, Xiao Min and You Jiaxing

The purpose of this paper is to empirically analyze the effects of managerial overconfidence on debt maturity structure decisions in terms of liquidity risk and asset…

1319

Abstract

Purpose

The purpose of this paper is to empirically analyze the effects of managerial overconfidence on debt maturity structure decisions in terms of liquidity risk and asset match in Chinese listed companies.

Design/methodology/approach

Combining data from CSMAR with some default data collected by hand, this paper selects age, tenure, education, education background and whether the board chair and CEO positions are consolidated in Chinese listed companies as proxies of managerial overconfidence. Thus, the authors acquired needed and credible empirical data.

Findings

It was found that, the younger the CEO, the shorter the tenure, the lower the education, having economics or management education and being chairman concurrently, CEOs have stronger managerial overconfidence. Thus, corporate debt maturity structure is more weakly correlated with debt ratio and asset structure.

Research limitations/implications

The findings in this study suggest that managerial irrationality, especially overconfidence, does have an effect on the financing decisions of firms.

Originality/value

This is the first paper to analyze the effects of managerial overconfidence on debt maturity structure decisions in terms of liquidity risk and asset match. The findings inspire firm risk management policies from managerial overconfidence.

Details

China Finance Review International, vol. 1 no. 3
Type: Research Article
ISSN: 2044-1398

Keywords

Book part
Publication date: 1 November 2018

Ahmed Bouteska

The aim of this paper is to analyze the impact of corporate governance (focused on some key mechanisms as board size, board independence, managerial ownership…

Abstract

The aim of this paper is to analyze the impact of corporate governance (focused on some key mechanisms as board size, board independence, managerial ownership, institutional ownership, and chief executive officer duality) on financial analysts’ behavior in US. Results from panel data analysis for 294 US listed firms observed from 2007 to 2014 show that several attributes of the board of directors and audit committee have no effects on the number of analysts who are following the firm and the properties of analysts’ earnings forecasts. Findings also suggest that firms with independent and large boards and blockholders ownership benefit of more analyst following. In addition, it is proven that analysts’ earnings forecasts are optimistic and more accurate for companies where blockholder ownership, either by managers or external entities have larger quoted spreads but of lower quality for the ones which have greater independent board members and institutional investor’s holding.

Details

International Corporate Governance and Regulation
Type: Book
ISBN: 978-1-78756-536-4

Keywords

Article
Publication date: 6 March 2017

Pascal Nguyen, Nahid Rahman and Ruoyun Zhao

This paper aims to evaluate the robustness of the listing effect in Australia, that is whether acquisitions of private firms create more value to the bidding firm’s…

Abstract

Purpose

This paper aims to evaluate the robustness of the listing effect in Australia, that is whether acquisitions of private firms create more value to the bidding firm’s shareholders than acquisitions of publicly listed firms.

Design/methodology/approach

The authors analyze the market reaction to the announcement of takeover bids initiated by Australian public firms on private and public targets over the period 1990-2011. The analysis controls for a wide range of bidder, deal and target country characteristics that are likely to correlate with the target’s listing status and acquirer abnormal returns. The authors also use a selection model to address the endogenous choice of the target’s listing status.

Findings

The results indicate that bidders experience significantly higher abnormal returns of about 1.7 per cent in the 11-day event window when the target is a private firm. The authors show that this result is broad-based and persistent. It does not appear to depend on whether the target is small or large; whether it is related or unrelated to the bidder’s industry; whether it is in the resources sector; and whether the transaction is domestic or cross-border. They find some evidence that bidder returns might be stronger for larger acquisitions, for unrelated targets, and in poor market conditions such as in the wake of the recent global financial crisis.

Research limitations/implications

The research would benefit from the inclusion of the bidding firm’s ownership and governance characteristics.

Practical implications

The results support the view that market frictions contribute to make private firms attractive targets.

Originality/value

The analysis confirms the pervasiveness of the listing effect in a market characterized by a lesser degree of competition, higher search costs and the significance of the natural resources sector.

Details

Studies in Economics and Finance, vol. 34 no. 1
Type: Research Article
ISSN: 1086-7376

Keywords

Article
Publication date: 7 March 2022

Bilal Ahmad and Saba Bilal

This study intends to examine the impact of a fear of coronavirus disease 2019 (COVID-19) on workers' career optimism via perceived job insecurity among non-managerial

Abstract

Purpose

This study intends to examine the impact of a fear of coronavirus disease 2019 (COVID-19) on workers' career optimism via perceived job insecurity among non-managerial working restaurant employees.

Design/methodology/approach

Time-lagged quantitative data were collected in two waves from 316 non-managerial on-job restaurant employees. Structural equation modeling technique was applied to examine the measurement and structural model.

Findings

The study showed that workers' fear of COVID-19 positively impacts their job insecurity. Further, the study found that increasing level of job insecurity depletes workers' career optimism—an outlook of their future career prospects.

Research limitations/implications

The study suggests organizations should work to make employees feel secure in terms of their job continuity and career progression. Eventually, this would support employees in shielding themselves against possible resource loss (e.g. career optimism) due to pandemic crises.

Originality/value

Extant literature has tested the impact of the COVID-19 pandemic on employees' workplace attitudes and behaviors such as job satisfaction (e.g. Bajrami et al., 2021) and safety performance (e.g. Kim et al., 2021). However, little has been researched on the impact of the COVID-19 pandemic on employees' future career outlook, particularly of non-essential workers in the hospitality industry. To the best of the author's knowledge, an explicit examination of the impact of COVID-19 fear on career optimism has not been conducted previously. Hence, this study will not only be a valuable contribution in the literature of career management, but will also yield important practical implications.

Details

Kybernetes, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0368-492X

Keywords

Book part
Publication date: 15 March 2007

Ingie Hovland

Development organisations today are faced with a new set of challenges around the use of research. They are charged with generating credible knowledge, moving it around…

Abstract

Development organisations today are faced with a new set of challenges around the use of research. They are charged with generating credible knowledge, moving it around, using it in policy, and acting on it in partnership with others. Several Northern and Southern development NGOs are attempting to shift from being “service providers” to “knowledge brokers”, for example, in the quest to find new roles and relevance for themselves (Lewis & Wallace, 2000). There has thus been a lot of focus recently on the relationship between research, policy, and practice. Many questions within this field centre on how development organisations can use research in practice, in their work. In this chapter, however, I wish to turn the question around and ask: how does the research fare when it is done on development organisations themselves? And what is the relationship between research and practice in that situation?

Details

Negotiating Boundaries and Borders
Type: Book
ISBN: 978-0-7623-1283-2

Article
Publication date: 14 September 2018

Jenny (Jiyeon) Lee, Youngdeok Lim and Hyung Il Oh

The purpose of this study is to examine the relevance of American Customer Satisfaction Index (ACSI) to management voluntary forecasts of earnings. The authors further…

Abstract

Purpose

The purpose of this study is to examine the relevance of American Customer Satisfaction Index (ACSI) to management voluntary forecasts of earnings. The authors further investigate whether the market reacts to such forecasts in respect of satisfaction.

Design/methodology/approach

The authors’ econometric models are constructed from previous work in accounting to specify the effect of ACSI on the issuance and optimism of management forecasts. Our model also specifies the impact of management optimism with respect to ACSI on stock returns. The data consisting of US firms in the 2001-2010 is collated from several databases and analyzed using multiple regression procedures.

Findings

Results indicate that ACSI is positively associated with the likelihood of issuing management forecasts and boosts management optimism. It is also found that investors react negatively to management optimism that is inherent in forecasts and results from satisfaction.

Research limitations/implications

The authors’ research findings not only complement prior work on the linkage between customer satisfaction and firm value by incorporating a managerial perspective but also respond to the recent call for further work on how relevant marketing metrics drive organizational decisions and firms’ financial performance. It should be noted that findings are limited to firms that release both a voluntary issuance of management forecasts and ACSI.

Practical implications

The study results shed light on the justification of marketing expenditures and provide a response to the call for marketing accountability. The study results also enable managers to make better decisions about whether and when to issue a forecast. The authors’ research further calls stakeholders’ attention to the presence of management forecast optimism with respect to satisfaction.

Originality/value

Despite the importance of managers as primary information generators and disseminators in the capital markets, there appears to be little discussion on the satisfaction’s relevance to market participants, particularly in relation to the role of managers. Therefore, this investigation is the first to empirically show the relevance of ACSI to management earnings forecasts that have been ignored in the marketing literature.

Details

European Journal of Marketing, vol. 52 no. 9/10
Type: Research Article
ISSN: 0309-0566

Keywords

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