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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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Cash is Queen: Female CEOs’ propensity to hoard cash
TL;DR: The authors found that female CEOs hold more cash, reverse cash deficits faster, and are more likely to use excess cash to increase dividends, but not investment, suggesting that risk aversion on the part of female CEOs does not hurt financial performance but rather enhances it.
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Managerial optimism and post-financing stock performance in Taiwan: A comparison of debt and equity financing
TL;DR: In this paper, the authors compare post-financing stock performance for debt-issuing portfolio with equityissuing one in Taiwan to identify whether firms' financing decisions were driven by managerial optimism or market timing.
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Are CEOs Different
Steven N. Kaplan,Morten Sorensen +1 more
TL;DR: In this article, the authors study how CEO candidates differ from candidates for other top management positions, particularly CFOs, and find that more than half of the variation in the 30 assessed characteristics is explained by four factors that they interpret as general ability, execution, charisma, and strategic.
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Seasoned Equity Issuers’ R&D Investments: Signaling or Over-Optimism
Abstract: It is well-known that investors often react negatively to the announcements of seasoned equity offerings (SEOs). We posit that issuers can use positive discretionary (higher-than-expected) RD these issuers are more likely to use new capital in future RD and they produce better post-SEO operating performance. In contrast, we find some evidence of managerial over-optimism among low-tech issuers: Investors tend to penalize low-tech firms with positive discretionary RD they are more likely to hold new capital as cash; and they fail to produce better post-SEO operating performance.
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Interest rates, R&D investment and the distortionary effects of R&D incentives
Uluc Aysun,Zeynep Kabukcuoglu +1 more
TL;DR: In this article, the first analysis of how interest rates are related to firms' allocation of investment between R&D and non-R&D activities and how r&D incentives alter this relationship.
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.
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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.
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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.