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Article
Publication date: 21 August 2019

Tommy Gärling, Dawei Fang and Martin Holmen

The purpose of this paper is to review behavioral explanations of the empirical observation that investment managers in mutual fund companies increase their risk taking…

Abstract

Purpose

The purpose of this paper is to review behavioral explanations of the empirical observation that investment managers in mutual fund companies increase their risk taking when offered incentives based on how their performance is ranked compared to peers.

Design/methodology/approach

A conceptual model is proposed of how research on social comparison, competition and financial risk taking may explain increased investor risk taking induced by rank-based incentives. Research findings in each of the strands of research are reviewed.

Findings

A proposed main explanation is that an above-average bias in comparing oneself with competitors results in overconfidence that increases risk taking. A complementary proposed explanation is that an anticipated loss when lagging behind increases risk taking, and another proposed complementary explanation the belief that risk taking is a winning strategy.

Originality/value

The results provide a broad framework for directions of research on social comparison processes in the mutual fund industry addressing the difficulties in implementing performance evaluations.

Details

Review of Behavioral Finance, vol. 12 no. 2
Type: Research Article
ISSN: 1940-5979

Keywords

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Article
Publication date: 17 April 2020

Tommy Gärling, Dawei Fang, Martin Holmen and Patrik Michaelsen

The purpose of this paper is to investigate how social comparison and motivation to compete account for elevated risk-taking in fund management corroborated by asset…

Abstract

Purpose

The purpose of this paper is to investigate how social comparison and motivation to compete account for elevated risk-taking in fund management corroborated by asset market experiments when performance depends on rank-based incentives.

Design/methodology/approach

In two laboratory experiments, university students (n1 = 240/n2 = 120) make choices between risky and certain outcomes of hypothetical sums of money. Both experiments investigate in which direction risky choices in an individual condition (individual risk preference) are shifted when participants compare their performance to another participant's performance (social comparison), being instructed or not to outperform the other (incentive to compete).

Findings

In the absence of incentives to compete, participants tend to minimize the differences between expected outcomes to themselves and to the other, but when provided with incentives to compete, they tend to maximize these differences. An independent additional increase in risk-taking is observed when participants are provided with incentives to compete.

Originality/value

Original findings include that social comparison does not evoke motivation to compete unless incentives are offered and that increases in risk-taking depend both on what the other chooses and the incentives.

Details

Review of Behavioral Finance, vol. 13 no. 2
Type: Research Article
ISSN: 1940-5979

Keywords

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Book part
Publication date: 1 January 2000

John Douka and Martin Holmen

In this chapter we examine the relation between managerial ownership and the announcement returns of 93 Swedish risk-reducing acquisitions, completed over the 1980–1995…

Abstract

In this chapter we examine the relation between managerial ownership and the announcement returns of 93 Swedish risk-reducing acquisitions, completed over the 1980–1995 period. The evidence shows that there are not distinct governance characteristics associated with bidders' risk-reducing acquisitions. Our results indicate that firms engage in diversifying acquisitions at the expense of shareholders' wealth when managers have no equity stakes on the bidder This result is consistent with the view that risk-reducing acquisitions are motivated by managers' need to diversify the risk associated with their human capital. This result suggests that risk-reducing acquisitions occur when managers' firm-specific human capital is at risk. Managers elect corporate risk-reducing activities as a means of reducing the risk of their human capital. Risk-reducing acquisitions, however, by firms where managers hold equity stakes increase firm value. This result suggests that managerial owners make risk-reducing acquisitions when they have identified potential corporate gains from risk-reduction. Simultaneous equation estimations provide additional evidence suggesting that managerial ownership affects bidder's shareholder returns, while there is no evidence of reverse causality.

Details

Advances in Mergers and Acquisitions
Type: Book
ISBN: 978-1-84950-061-6

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Article
Publication date: 4 April 2016

Jeanette Carlsson Hauff, Anders Carlander, Amelie Gamble, Tommy Gärling and Martin Holmen

The purpose of this paper is to investigate how trust in the sender of financial information and a narrative vs fact-related format of the information influence intentions…

Abstract

Purpose

The purpose of this paper is to investigate how trust in the sender of financial information and a narrative vs fact-related format of the information influence intentions to save in a mutual fund.

Design/methodology/approach

In Experiment 1, 186 undergraduates participate and in Experiment 2, 434 Swedish citizens between 18 and 70 years randomly chosen from a consumer panel. In both experiments participants are randomized to two conditions in which they are presented with the same information about a mutual fund in a narrative or a traditional fact-related format. In four different between-groups conditions crossed with information format, pre-tested descriptions of different fictitious banks are presented. The descriptions are combined in a fractional factorial design such that one bank is low in the three trust determinants of competence, benevolence and transparency, whereas the other three banks are high in one of the trust determinants but lower in the others. Ratings are made of the information with respect to how much positive affect the information evokes, interest in the message and intention to save in the mutual fund.

Findings

In both experiments the narrative compared to the fact-based information format increases positive affect, interest and intention to save. Trust in the bank has an independent effect of increasing the intention to save.

Practical implications

The narrative format of financial information may be key to increase involvement in financial choices but needs to be supplemented by a message that reinforces the positive affect and interest evoked by the format.

Originality/value

A demonstration of how a narrative format of financial information and trust in the sender jointly influence intentions to save in a mutual fund.

Details

International Journal of Bank Marketing, vol. 34 no. 2
Type: Research Article
ISSN: 0265-2323

Keywords

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Article
Publication date: 26 August 2014

Jeanette Carlsson Hauff, Anders Carlander, Amelie Gamble, Tommy Gärling and Martin Holmen

The purpose of this paper is to investigate whether a narrative compared to a traditional fact-related format of financial information elicits more involved processing of…

Abstract

Purpose

The purpose of this paper is to investigate whether a narrative compared to a traditional fact-related format of financial information elicits more involved processing of such information by consumers and therefore more informed choices of retirement savings.

Design/methodology/approach

A total of 394 undergraduates were recruited to three experiments. In Experiments 1 and 2 participants presented with information about a mutual fund were randomly assigned to one of four conditions (narrative format vs fact-related format crossed with optimistic vs pessimistic financial forecast). In both experiments dependent variables were positive affect, emotive response and purchase intention, and in Experiment 2 also scepticism about the information. Involvement and financial knowledge were furthermore measured in Experiment 2. In Experiment 3 information was presented about a savings account. Participants were randomly assigned to either a condition with a narrative or a fact-related information format. The dependent variables were the same as in Experiment 2.

Findings

The research finds support for that information about a financial message in a narrative format results in stronger positive affect, emotive response and purchase intention. No effect of scepticism toward the message is observed. Involvement and financial knowledge tend to interact with format. Mediation analyses support that positive affect induced by the narrative format impacts on emotive response which jointly with positive affect impacts on purchase intention.

Practical implications

The research suggests that a narrative message format may be used in marketing financial products to increase passive consumerś involvement.

Originality/value

The first demonstration of that a narrative format has an effect on processing of financial information.

Details

International Journal of Bank Marketing, vol. 32 no. 6
Type: Research Article
ISSN: 0265-2323

Keywords

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Book part
Publication date: 31 May 2016

Stefan Sjögren

This paper aims to develop and test a new way of modeling airline operations and apply it to measure and compare the efficiency of international airlines, with a special…

Abstract

This paper aims to develop and test a new way of modeling airline operations and apply it to measure and compare the efficiency of international airlines, with a special focus on deregulation effects. The paper elaborates on the choice of variables, following the early work of Schefczyk (1993) and Scheraga (2004). The value chain of the airlines determines the variables included in three different models. Using data envelopment analysis, the efficiency scores show that North American airlines are more efficient in producing services offered to customers. Few differences are found between regions in allocating service output to match demand. One plausible explanation for this difference is that airlines operate within competitive environments. In a highly competitive market, management decisions focus on productive actions and cost reduction. In a less competitive environment, there is a higher degree of adjustments of the services produced. Using the Malmquist productivity index, measurements reveal that there is a catch-up effect for the European and Asian/South American airlines service production during the studied time period, which was from 1990 to 2003.

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Article
Publication date: 7 October 2014

Peng Wang

This paper addresses the topic “The interaction between financial institutions and firms in the nonfinancial sectors” in the special issue of “Banking and finance in…

Abstract

Purpose

This paper addresses the topic “The interaction between financial institutions and firms in the nonfinancial sectors” in the special issue of “Banking and finance in China.” The purpose of this paper is to examine the trading behavior and price effects of foreign institutions under the celebrated Qualified Foreign Institutional Investor (QFII) scheme on all non-financial firms in the Chinese A-share markets.

Design/methodology/approach

Using quarterly equity-level foreign institution transactions from 2005Q1 to 2011Q4 in the Chinese A-share market, the author finds a positive and significant contemporaneous relationship between foreign flows and equity returns. For each quarter, the author sorts the stocks into ten portfolios based on the percentage of foreign flows, and employs the bivariate vector autoregression (VAR) model to examine the contemporaneous association in detail.

Findings

Foreign institutions in the Chinese A-share markets do not show positive or negative feedback trading; however, their flows have a strong impact on future equity returns because of informational advantage. Additionally, different associations are found between foreign flows and equity returns.

Research limitations/implications

Constraints on data availability exist, and a quarterly dimension is too coarse to provide a statistically precise result, although certain related papers use quarterly dimension data. Further research is required using higher frequency data.

Originality/value

This paper provides a first look at foreign institution trading patterns and price effects on local equity returns in the Chinese A-share markets. Additionally, the equity level data allow the author to exclude the stocks that were not bought by foreign institutions and to detect the “pure effect” of foreign flows on equity returns.

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Article
Publication date: 12 March 2018

Poul Andersen, Elsebeth Holmen and Ann-Charlott Pedersen

Networks and relationships are not stable. On the contrary, they change and are transformed by the actors who take part in them. Change and transformation result from the…

Abstract

Purpose

Networks and relationships are not stable. On the contrary, they change and are transformed by the actors who take part in them. Change and transformation result from the actions and reactions of these actors. However, a key issue is what makes the actors choose some actions and reactions while refraining from others. The paper aims to discuss these issues.

Design/methodology/approach

The authors argue that the actors’ expectations to the future of the network are formative for the actions and reactions and, furthermore, that the future expectations are formed by interaction among the actors that take part in the networks.

Findings

The authors depart from the existing foresight literature, but realign its ideas to fit with the core tenets of the IMP approach. Thereby, the purpose is twofold: to explore and conceptualize network foresight phenomena as well as to contribute to the practice of collective foresighting in business networks.

Research limitations/implications

The authors suggest research into formations of expectations in networks with a specific view to the interactive and structural effects of networks. Furthermore, the authors suggest a framework for categorizing network episodes and linking these to the formation of recognized issues and solutions.

Practical implications

The authors provide a framework for analyzing the focus of business networks in terms of solutions and issues, and analytically breaking down the interaction among these.

Originality/value

The authors introduce the concept of business network foresight, both as a distinct concept that enables us to understand change and transformation in networks, but also as a procedure for supporting actors’ strategizing efforts in business networks.

Details

IMP Journal, vol. 12 no. 1
Type: Research Article
ISSN: 2059-1403

Keywords

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Article
Publication date: 8 March 2021

Boris Urban and Mandla Maphumulo

Research shows how with the evolution of technologies, technological opportunism enables firms to effectively identify and exploit innovations and opportunities through…

Abstract

Purpose

Research shows how with the evolution of technologies, technological opportunism enables firms to effectively identify and exploit innovations and opportunities through strategic management practices, such as adopting an entrepreneurial orientation. The study’s purpose is to explain the nature of the relationship between technological opportunism and innovation performance, while accounting for any possible moderating effects of entrepreneurial orientation.

Design/methodology/approach

A cross-sectional design was used to collect primary data from targeted respondents (n = 347) in the South African banking sector. Initially, instrument validity and reliability is established and the hypotheses are tested using multiple regression analyses.

Findings

The findings support the hypotheses insofar higher levels of technological opportunism are positively associated with higher levels of innovation performance, which is moderated by entrepreneurial orientation in terms of innovativeness, risk-taking and proactiveness. Moreover, competitive hostility, as a control played a significant role in the moderation effect between technological opportunism and innovation performance.

Practical implications

Leaders need to appreciate the importance of an entrepreneurial organization in leveraging technological opportunities which is pivotal for emerging economies, rather than individual entrepreneurial activities, which are rarely scalable in African economies.

Originality/value

The study provides an original contribution by increasing the theoretical and empirical reach of research on entrepreneurial orientation and technological opportunism. Since the original scales have primarily been employed in developed economies, by verifying their psychometric properties, this now allows for further replication studies to take place in other similar emerging market contexts.

Details

European Journal of Innovation Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1460-1060

Keywords

Content available
Book part
Publication date: 17 August 2017

Abstract

Details

No Business is an Island
Type: Book
ISBN: 978-1-78714-550-4

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