CEO Overconfidence and Dominance in Bank Financial Decisions: The US Evidence

This thesis empirically investigates financial and investment decisions of banks and bank holding companies in a managerial behavioural approach with a view to ascertaining to what extent managerial psychology is as important as managerial incentive a determinant affecting the process of instituting an efficient bank governance mechanism. A large sample of US banks and bank holding companies over 1996-2006 is examined for the effects of irrational and powerful bank Chief Executive Officers (CEOs). Integrating the analyses of both corporate governance and corporate finance, the thesis uncovers evidence that overconfident, dominating and overconfident-dominating bank CEOs have negative impact on bank financial decisions, such as M&As, payout policy and risk taking as they tend to overestimate their ability and underestimate possible risks of invested projects. Cognitive failures of this origin would have the worst fallout effects when the overconfident CEOs are also dominating the boards. Deploying Holder 67 and CEO-Chair as proxies for overconfidence and dominance factors respectively, the study shows that overconfident, dominating and overconfident-dominating CEOs are more likely to perform mergers with dubious quality, particularly in activity and geography diversifying mergers. The one- and two-year negative post-merger performance of banks ran by overconfident, dominating and overconfident-dominating CEOs bolsters the argument that mergers undertaken by these CEOs are economically undesirable. For the effects of psychological and cognitive biases on bank payout policy, results show that overconfident and overconfident-dominating CEOs are negatively related to the dividend payout ratio and total payout ratio. The negative association becomes stronger when the banks under examination have a higher degree of information asymmetry or with less growth opportunity. Evidence also confirms that CEO overconfidence, dominance and especially overconfidence-dominance have negative effects on bank risk control. CEOs with these attributes have a higher propensity for taking some bank-related risks, such as market-based risk, earnings volatility, credit risk and default risk. Overall, findings of this research suggest the essentiality of taking account of managerial psychological biases in reforming the existing bank governance mechanism, especially in designing appropriate compensation packages for executives and the desirable board composition for banks with overconfident-dominating CEOs

Knowledge assimilation processes of rapidly internationalising firms: longitudinal case studies of Scottish SMEs

<p>Purpose – The accumulation of knowledge and learning by firms has been identified as being critical to their internationalisation. This paper aims to explore the knowledge assimilation processes of rapidly internationalising small to medium-sized enterprises (SMEs).</p> <p>Design/methodology/approach – This is a qualitative enquiry in two stages. First, four case studies were selected from firms that were participating in an internationalisation programme run by Scottish Enterprise, the regional development agency. Data collection involved semi-structured interviews with chief executive officers (CEOs) and programme providers, and archival data. Second, two focus groups were held with six CEOs participating in the programme.</p> <p>Findings – The findings indicate that knowledge sharing is important for rapidly internationalising SMEs and that firms adopted high levels of formality in assimilating knowledge. Two key aspects of formality were identified as important; formal planned events to share explicit and tacit knowledge and the codification of tacit to explicit knowledge. Knowledge may be assimilated less formally by the retention of tacit knowledge as tacit, while utilising elements of formality. The paper finds that learning for internationalisation can be transferred to support domestic growth.</p> <p>Practical implications – It is important for firms to develop appropriate knowledge assimilation processes within their management systems to support internationalisation. The CEO and management team need to take the lead in marshalling commitment to learning processes and in cultivating an organisational culture that is supportive of learning.</p> <p>Originality/value – This research contributes to international entrepreneurship by providing insights into the knowledge assimilation processes employed by rapidly internationalising SMEs to manage the tensions between the need for greater formality to be efficient at learning, and informality to enable speedy decision making.</p&gt

Intra-industry Trade and Production Networks

This paper examines alternative determinants of intra-industry trade (IIT). Technology transfer via vertical FDI can be an alternative determinant to distance and country-specific factors in gravity equations. Vertical FDI is likely to be made in neighbouring countries in the presence of large gaps in wages and technology. These large gaps lead to foreign direct investment (FDI) and promote technology transfer from headquarters to overseas affiliates. The technology transfer through vertical FDI promotes activities in the overseas affiliates and thus increases re-imports, which can increase IIT.FDI; Technology Transfer; Wage Gap; Comparative Advantage; Firm Heterogeneity.

Social stigma and executive compensation

We document that executives working at firms perceived negatively in light of social norms, such as tobacco, gambling and alcohol, earn a significant compensation premium. The premium compensates for personal costs executives bear due to their employer’s negative public perception and include: (i) a reduced likelihood these CEOs will serve as directors on other firms’ boards, which associates with lower executives’ social status, and (ii) impaired job mobility as employers shun stigmatized executives. The compensation premium is not explained by higher managerial skill required in firms we investigate, higher employment contract risk, political capital, litigation risk, or differences in corporate governance quality, and robust to endogeneity concerns. Our results highlight the significant impact job-related social stigma has on executive compensation

Objectives and Constraints of Entrepreneurs: Evidence from Small and Medium Size Enterprises in Russia and Bulgaria

We analyze the principal objectives and constraints of small and medium enterprises (SMEs), using data from a survey of 437 owners and top managers (CEOs) of SMEs in Russia and Bulgaria. The CEOs display similar views and identify a small number of specific constraints as being the most important ones. The constraint on external financing is a particularly serious one and the SMEs use internal finance as a fall-back option. Our econometric analysis indicates that characteristics of the entrepreneur, firm and the firm's environment are important but varying determinants of which constraints are identified as the most important ones. Our results also suggest that the nature of disruption of production and of the financial constraints after the fall of central planning was more ubiquitous and all-encompassing in Russia than in Bulgaria.

Giving In Numbers: 2014 Edition

Developed by CECP, in association with The Conference Board, 'Giving in Numbers: 2014 Edition' is based on data from 261 companies, including 62 of the largest 100 companies in the Fortune 500. The sum of contributions across all respondents of the recent survey on 2013 contributions totaled more than $25 billion in cash and in-kind giving. This report not only presents a profile of corporate philanthropy and employee engagement in 2013, but also pinpoints how corporate community engagement is evolving and becoming more focused following the end of the Great Recession. This is the tenth annual report on trends in corporate giving

Learning from the Past: Trends in Executive Compensation over the Twentieth Century

In recent years, a large academic debate has tried to explain the rapid rise in CEO pay experienced over the past three decades. In this article, I review the main proposed theories, which span views of compensation as the result of a competitive labor market for executivesto theories based on excess of managerial power. Some of these hypotheses have foundsupport in cross-sectional evidence, but it has proven more difficult to determine which factors have caused the observed changes in pay over time. An alternative strategy is to evaluate the fit of plausible explanations out of sample by contrasting them with the evolution in executive pay and the market for managers during earlier time periods. A case study of General Electric suggests that evidence for earlier decades can speak to the recent trends and reveals the limitations of current explanations to address the long-run data.executive compensation, managerial incentives, corporate governance, market for managers

Connections and Performance in Bankers' Turnover: Better Wed over the Mixen than over the Moor

In this paper we study top executive turnover in Italian Banks over the period 1993-2001. We relate the probability of survival of top executives (Presidents, CEOs and General Managers) to bank performance and the manager’s local connections, controlling for (observable and unobservable) bank and manager characteristics by exploiting longitudinal information on bank-manager appointments. We measure the extent? of managers’ local connections by the distance between the province of the bank’s headquarters and the manager’s province of birth. We show that top managers tend to be local in the sense that the distribution of this distance is heavily skewed towards zero. On the basis of this evidence, we address two questions. First, we investigate whether connections affect the duration of the appointment at the bank. Second, we ask whether connections entrench managers at the expense of the bank’s performance. We find that connections generally increase the probabilities of managerssurviving at their banks, and that the positive effect of performance on tenure (as amply documented by the executive turnover literature) disappears once connections are taken into account. On the other hand, we provide evidence against the hypothesis that managerial connections contain information valuable for enhancing a bank’s performance. In particular, we find that highly connected boards cause the shorter survival of banks, and that those who benefit from connections are top managers themselves (mostly Presidents and General Managers). This suggests that connections may be collusion devices with which to maintain and share rents.connections, executive turnover, commercial and cooperative banks

Predispositions and the Political Behavior of American Economic Elites: Evidence from Technology Entrepreneurs

Economic elites regularly seek to exert political influence. But what policies do they support? Many accounts implicitly assume economic elites are homogeneous and that increases in their political power will increase inequality. We shed new light on heterogeneity in economic elites' political preferences, arguing that economic elites from an industry can share distinctive preferences due in part to sharing distinctive predispositions. Consequently, how increases in economic elites' influence affect inequality depends on which industry's elites are gaining influence and which policy issues are at stake. We demonstrate our argument with four original surveys, including the two largest political surveys of American economic elites to date: one of technology entrepreneurs—whose influence is burgeoning—and another of campaign donors. We show that technology entrepreneurs support liberal redistributive, social, and globalistic policies but conservative regulatory policies—a bundle of preferences rare among other economic elites. These differences appear to arise partly from their distinctive predispositions