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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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The Making of Hawks and Doves: Inflation Experiences on the FOMC
TL;DR: For example, the authors show that personal experiences of inflation strongly influence the hawkish or dovish leanings of central bankers, and that these experiences also help to explain the federal funds target rate.
Share Pledges and Margin Call Pressure
TL;DR: In this paper, the authors develop and test a margin call hypothesis that controlling shareholders may initiate share repurchases to fend off potential margin calls associated with pledged stocks in order to maintain their control rights and further show that regulatory restrictions of control rights on pledging effectively reduce the likelihood of firms' repurchasing.
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CEO Tenure and Risk-Taking
Dong Chen,Yudan Zheng +1 more
TL;DR: The authors conducted a systematic analysis of the effect of CEO tenure on risk-taking and found that the effect depends on the information asymmetry about CEO ability, which is consistent with this interpretation and recent theoretical work.
Journal ArticleDOI
Hubris and Unethical Decision Making: The Tragedy of the Uncommon
TL;DR: This paper found a significant correlation between CEO hubris and earnings manipulation at the firms they lead, an outcome broadly consistent with the theory developed, finding that hubris leads managers to invoke an amoral decision process which causes a higher incidence of unethical behavior among these individuals.
Journal ArticleDOI
Are CEOs Different
Steven N. Kaplan,Morten Sorensen +1 more
TL;DR: In this article, the authors used a data set of over 2,600 executive assessments to study thirty individual characteristics of candidates for top executive positions (i.e., CEO, CFO, COO and others).
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.
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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.