A role congruity theory of prejudice toward female leaders proposes that perceived incongruity between the female gender role and leadership roles leads to 2 forms of prejudice: (a) perceiving women less favorably than men as potential occupants of leadership roles and (b) evaluating behavior that fulfills the prescriptions of a leader role less favorably when it is enacted by a woman. One consequence is that attitudes are less positive toward female than male leaders and potential leaders. Other consequences are that it is more difficult for women to become leaders and to achieve success in leadership roles. Evidence from varied research paradigms substantiates that these consequences occur, especially in situations that heighten perceptions of incongruity between the female gender role and leadership roles.

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Role congruity theory of prejudice toward female leaders.

Despite many excellent research papers, we still do not fully understand the motives behind mergers and tender offers or whether they bring an increase in aggregate market value. In their comprehensive review article (from which the above quote is taken), Jensen and Ruback (1983) summarize the empirical work presented in over 40 The hubris hypothesis is advanced as an explanation of corporate takeovers. Hubris on the part of individual decision makers in bidding firms can explain why bids are made even when a valuation above the current market price represents a positive valuation error. Bidding firms infected by hubris simply pay too much for their targets. The empirical evidence in mergers and tender offers is reconsidered in the hubris context. It is argued that the evidence supports the hubris hypothesis as much as it supports other explanations such as taxes, synergy, and inefficient target management. * The earlier drafts of this paper elicited many comments. It is a pleasure to acknowledge the benefits derived from the generosity of so many colleagues. They corrected several conceptual and substantive errors in the previous draft, directed my attention to other results, and suggested other interpretations of the empirical phenomena. In general, they provided me with an invaluable tutorial on the subject of corporate takeovers. The present draft undoubtedly still contains errors and omissions, but this is due mainly to my inability to distill and convey the collective knowledge of the profession. Among those who helped were C. R. Alexander, Peter Bernstein, Thomas Copeland, Harry DeAngelo, Eugene Fama, Karen Farkas, Michael Firth, Mark Grinblatt, Gregg Jarrell, Bruce Lehmann, Paul Malatesta, Ronald Masulis, David Mayers, John McConnell, Merton Miller, Stephen Ross, Richard Ruback, Sheridan Titman, and, especially, Michael Jensen, Katherine Schipper, Walter A. Smith, Jr., and J. Fred Weston. I also benefited from the comments of the finance workshop participants at the University of Chicago, the University of Michigan, and Dartmouth College, and of the referees.

/pdf/the-hubris-hypothesis-of-corporate-takeovers-yrn8pk74q5.pdf

The Hubris Hypothesis of Corporate Takeovers

A conglomerate merger generally leads, through the diversification effect, to reduced risk for the combined entity. As is well known, in perfect capital markets such risk reduction will not be beneficial to stockholders, since they can achieve on their own the preferred degree of risk in their "homemade" portfolios. What, then, is the motive for the widespread and persisting phenomenon of conglomerate mergers? In this study a "managerial" motive for conglomerate merger is advanced and tested. Specifically, managers, as opposed to investors, are hypothesized to engage in conglomerate mergers to decrease their largely undiversifiable "employment risk" (i.e., risk of losing job, professional reputation, etc.). Such risk-reduction activities are considered here as managerial perquisites in the context of the agency cost model. This hypothesis about conglomerate merger motivation is empirically examined in two different tests and found to be consistent with the data.

Risk reduction as a managerial motive for conglomerate mergers

https://eml.berkeley.edu/~ulrike/Papers/OCmergers_Final_JFEformat_20feb2008.pdf

Who Makes Acquisitions? CEO Overconfidence and the Market's Reaction

This study examines the role of a chief executive officer's hubris, or exaggerated self-confidence, in explaining the large size of some premiums paid for acquisitions. In a sample of 106 large acquisitions, we found that four indicators of CEO hubris are highly associated with the size of premiums paid: the acquiring company's recent performance, recent media praise for the CEO, a measure of the CEO's self-importance, and a composite factor of these three variables. The relationship between CEO hubris and premiums is further strengthened when board vigilance is lacking-when the board has a high proportion of inside directors and when the CEO is also the board chair. On average, we found losses in acquiring firms' shareholder wealth following an acquisition, and the greater the CEO hubris and acquisition premiums, the greater the shareholder losses. Thus, CEO hubris has substantial practical consequences, in addition to having potentially great theoretical significance to observers of strategic behavior.

Explaining the Premiums Paid for Large Acquisitions: Evidence of CEO Hubris

The paper examines recent merger and takeover activity in the United Kingdom. Specifically, the impact of takeovers on shareholder returns and management benefits is analyzed, and some implications for the theory of the firm are drawn from the results. The research showed that mergers and takeovers resulted in benefits to the acquired firms' shareholders and to the acquiring companies' managers, but that losses were suffered by the acquiring companies' shareholders. The results are consistent with takeovers being motivated more by maximization of management utility reasons, than by the maximization of shareholder wealth.

https://ecsocman.hse.ru/data/824/126/1231/firth_-_takeovers_1980.pdf

Takeovers, Shareholder Returns, and the Theory of the Firm

The major purpose of a corporate annual report is to convey information about the company's affairs to outside parties. The information can be used both to monitor agency relationships (Jensen and Meckling [25]; Watts [32]) and to provide inputs into user decision models (e.g. Altman [3]). Until recently, however, very little research had been conducted into annual reports in the U.K. and hence little was known about their effectiveness. This has been remedied, to some extent, in the last few years and there is now a growing body of literature relating to annual reports. For example, the major professional British accounting bodies commissioned a study to examine‘the scope and aims of published financial reports in the light of modern needs and conditions’. This resulted in the publication of The Corporate Report (ASSC [1]), a document which recommended a number of radical changes. Other studies have investigated the degree of understanding of annual reports by private shareholders (Lee and Tweedie [26]), the degree of consensus about the usefulness of annual report data (Firth [21]), the actual degree of disclosure by British companies (Firth [22, 23]), and the impact of accounting information on share prices (see Firth [20]).1 The purpose of this paper is to add to the literature by reporting the results of an empirical study which examined one aspect of the corporate reporting policies of British firms, namely the changes in the quality and extent of voluntary financial disclosure when raising finance in the stock market.

Raising Finance and Firms' Corporate Reporting Policies

The object of this study was to examine the extent of sex discrimination in the job market for accountants. The research design involved sending application letters to job advertisements appearing in the press. These letters came from males and females of varying race and marital backgrounds, although all had identical qualifications and work experience. The responses to these applications were then analyzed and formed the basis of the tests for discrimination. The results showed a significant level of discrimination against women and this was enhanced for those who were Colored, and/or those who were married and had children.

Sex discrimination in job opportunities for women

This paper examines the impact of certain types of qualified auditors' report on bank lending decisions and credit analysts' decisions in the United Kingdom. The research design involved sending a set of financial statements, which contained one of four different types of audit report, to a large sample of bankers and credit analysts. They were asked to state how much they would lend, or how much credit they would give, for each of the hour audit report situations. The mean loan-credit responses for each audit report type were then examined to see if there were any significant differences. It was found that two types of audit qualification, namely going concern problems and asset valuation problems, significantly affected decisions and that firms suffering these types of qualifications had their credit standing significantly impaired.

A note on the impact of audit qualifications on lending and credit decisions

The paper reports the results of a recent experimental study into the materiality-disclosure problem. Thirty case situations involving losses and gains on the sale of business assets were presented to 150 individuals and they were asked to state whether they would call for separate disclosure of the losses/gains as extraordinary items in the annual financial statements. Significant differences in the responses of the individuals were found and the results indicated that some consideration should be given by the professional accounting bodies to giving more guidance on materiality — disclosure decisions.

Michael Firth

Papers

Takeovers, Shareholder Returns, and the Theory of the Firm

Raising Finance and Firms' Corporate Reporting Policies

Sex discrimination in job opportunities for women

A note on the impact of audit qualifications on lending and credit decisions

Consensus views and judgment models in materiality decisions