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Overconfidence and Early-life Experiences: The Impact of Managerial Traits on Corporate Financial Policies
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This article found that managers who believe that their firm is undervalued view external financing as overpriced, especially equity, and use less external finance and, conditional on accessing risky capital, issue less equity than their peers.Abstract:
We show that measurable managerial characteristics have significant explanatory power for corporate financing decisions beyond traditional capital-structure determinants First, managers who believe that their firm is undervalued view external financing as overpriced, especially equity Such overconfident managers use less external finance and, conditional on accessing risky capital, issue less equity than their peers Second, CEOs with Depression experience are averse to debt and lean excessively on internal finance Third, CEOs with military experience pursue more aggressive policies, including heightened leverage Complementary measures of CEO traits based on press portrayals confirm the resultsread more
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Are overconfident executives alike? overconfident executives and compensation structure: Evidence from China
Ying Sophie Huang,Mengyu Li +1 more
TL;DR: Li et al. as discussed by the authors studied the effect of executive overconfidence on their compensation structure by employing a sample of listed firms in China, an economy with a relatively collective culture, and found that overconfident CEOs in China also tend to have more incentive compensation despite the different culture.
Journal ArticleDOI
CEO Long-Term Incentive Pay in Mergers and Acquisitions
TL;DR: In this article, the authors analyzed the CEO incentives of inside debt in the form of deferred equity compensation in the context of M&A decisions and found that inside debt incentivizes CEOs to make less risky decisions for the benefit of debt holders and at the expense of shareholders.
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Payoff-Based Belief Distortion
TL;DR: This article proposed a mechanism in which experienced payoffs distort beliefs: gains lead an agent to relatively underweight negative new signals and thus to become overoptimistic, whereas losses do the opposite.
Journal ArticleDOI
When collusion meets the fraud triangle: a case study approach
Núria Villaescusa,Oriol Amat +1 more
TL;DR: In this paper, the authors explore how the different elements of the fraud triangle are present in a case of convicted accounting fraud in collusion, and they find that when a fraud is carried out in collaboration of several internal and external members of the company, a very limited perspective of fraud as an opportunity has been designed ad hoc for the fraud commission.
DissertationDOI
Essays in empirical corporate finance: CEO compensation, social interactions, and M&A
TL;DR: Huang et al. as mentioned in this paper studied the effect of social interactions on executive compensation and found that the compensation of socially connected CEOs is significantly more similar than that of a pair of non-connected CEOs.
References
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Journal Article
The Cost of Capital, Corporation Finance and the Theory of Investment
TL;DR: In this article, the effect of financial structure on market valuations has been investigated and a theory of investment of the firm under conditions of uncertainty has been developed for the cost-of-capital problem.
Posted Content
What Do We Know About Capital Structure? Some Evidence from International Data
Raghuram G. Rajan,Raghuram G. Rajan,Raghuram G. Rajan,Luigi Zingales,Luigi Zingales,Luigi Zingales +5 more
TL;DR: In this paper, the authors investigate the determinants of capital structure choice by analyzing the financing decisions of public firms in the major industrialized countries and find that factors identified by previous studies as important in determining the cross-section of the capital structure in the U.S. affect firm leverage in other countries as well.
Journal ArticleDOI
Unrealistic optimism about future life events
TL;DR: In this article, the authors investigated the tendency of people to be unrealistically optimistic about future life events and found that degree of desirability, perceived probability, personal experience, perceived controllability, and stereotype saliency would influence the amount of optimistic bias evoked by different events.
Journal ArticleDOI
The Hubris Hypothesis of Corporate Takeovers
TL;DR: The hubris hypothesis is advanced as an explanation of corporate takeovers by Jensen and Ruback as mentioned in this paper, who argued that the evidence supports the hubris hypotheses as much as it supports other explanations such as taxes, synergy, and inefficient target management.
Journal ArticleDOI
Debt and taxes
TL;DR: Miller et al. as discussed by the authors presented a paper on the thirty-fiveth annual meeting of the American Finance Association, Atlantic City, New Jersey, September 16-18, 1976 (May, 1977), pp. 261-275.