CEO Duality: Newspapers and Stock Market Reactions

This study aims to investigate the unsettled issue of the relationship between CEO duality and a firm’s value through the perspective of investors’ reaction to news which mention apical directors with a single role and Board Chair CEOs. With a unique and hand-collected database of 60,805 newspaper articles, text-analysis, event-study and regression analysis methodologies were applied to capture news sentiment and study the direction and the magnitude of the stock market reaction. Results reveal that news mentioning Board Chair CEOs are negatively processed by investors, revealing a negative perception by investors about CEO duality. The study provides empirical support for the agency theory, in contrast to the stewardship theory, in the interpretation of CEO duality. It also proposes the methodology of systematically quantifying language to explore corporate governance issues and their link with financial markets

Neural Correlates of Direct Access Trading in a Real Stock Market: An fMRI Investigation

Background: While financial decision making has been barely explored, no study has previously investigated the neural correlates of individual decisions made by professional traders involved in real stock market negotiations, using their own financial resources.Aim: We sought to detect how different brain areas are modulated by factors like age, expertise, psychological profile (speculative risk seeking or aversion) and, eventually, size and type (Buy/Sell) of stock negotiations, made through Direct Access Trading (DAT) platforms.Subjects and methods: Twenty male traders underwent fMRI while negotiating in the Italian stock market using their own preferred trading platform.Results: At least 20 decision events were collected during each fMRI session. Risk averse traders performed a lower number of financial transactions with respect to risk seekers, with a lower average economic value, but with a higher rate of filled proposals. Activations were observed in cortical and subcortical areas traditionally involved in decision processes, including the ventrolateral and dorsolateral prefrontal cortex (vlPFC, dlPFC), the posterior parietal cortex (PPC), the nucleus accumbens (NAcc), and dorsal striatum. Regression analysis indicated an important role of age in modulating activation of left NAcc, while traders' expertise was negatively related to activation of vlPFC. High value transactions were associated with a stronger activation of the right PPC when subjects' buy rather than sell. The success of the trading activity, based on a large number of filled transactions, was related with higher activation of vlPFC and dlPFC. Independent of chronological and professional age, traders differed in their attitude to DAT, with distinct brain activity profiles being detectable during fMRI sessions. Those subjects who described themselves as very self-confident, showed a lower or absent activation of both the caudate nucleus and the dlPFC, while more reflexive traders showed greater activation of areas involved in strategic decision making.Discussion: The neural correlates in DAT are similar to those observed in other decision making contexts. Trading is handled as a well-learned automatic behavior by expert traders; for those who mostly rely on heuristics, cognitive effort decreases, and transaction speed increases, but decision efficiency lowers following a poor involvement of the dlPFC

Blue and red in financial documents: the influence on attentional mechanisms and behavior

Purpose This study investigates whether colors red or blue in financial disclosure documents (Key Investor Information Documents – KIIDs) affect attention distribution toward the visual stimulus and the perception of financial attractiveness of the products. Design/methodology/approach In order to observe and measure financial consumers' visual attention, the unobtrusive methodology of eye-tracking is used on a sample of nonprofessional investors, applying an ecological protocol, through a cross-sectional design. Findings Financial information processing and visual attention distribution are influenced by the color of the KIID document, as red seems to attract attention, proxied by gazing behavior, more than blue. Red color, compared to blue, is also observed to push investors to rate the products as less financially attractive, especially when the product Risk Reward Profile is high. Practical implications The findings highlight the role of the basic visual properties of documents conveying financial information, prompting to investigate the unconscious and automatic mechanisms of individual's attention and its influence on decision making. Originality/value Using the eye-tracking tool, this study bridges neuroscience, color research, marketing and finance and provides new knowledge on the underlying neural mechanisms of financial consumers' behavior

Neural correlates of direct access trading in a real stock market: An fMRI investigation

Background: While financial decision making has been barely explored, no study has previously investigated the neural correlates of individual decisions made by professional traders involved in real stock market negotiations, using their own financial resources. Aim: We sought to detect how different brain areas are modulated by factors like age, expertise, psychological profile (speculative risk seeking or aversion) and, eventually, size and type (Buy/Sell) of stock negotiations, made through Direct Access Trading (DAT) platforms. Subjects and methods: Twenty male traders underwent fMRI while negotiating in the Italian stock market using their own preferred trading platform. Results: At least 20 decision events were collected during each fMRI session. Risk averse traders performed a lower number of financial transactions with respect to risk seekers, with a lower average economic value, but with a higher rate of filled proposals. Activations were observed in cortical and subcortical areas traditionally involved in decision processes, including the ventrolateral and dorsolateral prefrontal cortex (vlPFC, dlPFC), the posterior parietal cortex (PPC), the nucleus accumbens (NAcc), and dorsal striatum. Regression analysis indicated an important role of age in modulating activation of left NAcc, while traders' expertise was negatively related to activation of vlPFC. High value transactions were associated with a stronger activation of the right PPC when subjects' buy rather than sell. The success of the trading activity, based on a large number of filled transactions, was related with higher activation of vlPFC and dlPFC. Independent of chronological and professional age, traders differed in their attitude to DAT, with distinct brain activity profiles being detectable during fMRI sessions. Those subjects who described themselves as very self-confident, showed a lower or absent activation of both the caudate nucleus and the dlPFC, while more reflexive traders showed greater activation of areas involved in strategic decision making. Discussion: The neural correlates in DAT are similar to those observed in other decision making contexts. Trading is handled as a well-learned automatic behavior by expert traders; for those who mostly rely on heuristics, cognitive effort decreases, and transaction speed increases, but decision efficiency lowers following a poor involvement of the dlPFC

Corporate governance: a behavioural perspective

Managers, directors and investors, as subset of humans, display biases and rely on heuristics and gut feelings; given that these deviations from normative theory are correlated across people, the effects are not offset, but impact on firms and stock markets. In this thesis I explore two phenomena ( overconfidence and sentiment ) inside two different strands ( b e h a v i o u r a l c o r p o r a t e fi n a n c e and a s s e t p r i c i n g ), by adopting two different approach (micro and macro), and in particular following the fil rouge of the focus on board of directors (BoD) . After providing a detailed quantitative description of the dimension and the evolution of interlocking directorship (ID) in the Italian country over the years 1998-2013, taking advantage of the recent financial crisis as a natural element to test the hypothesis (disconfirmed) that these links are developed to reduce uncertainty ( R e s o u r c e D e p e n d e n c e T h e o r y ) , I propose ID as proxy for overconfidence at board level, during mergers and acquisitions (M&As). The examination of the psychological and experimental literature seems to suggest that directors, in this specific decision making context, may be influenced by a series of phenomena that make them to believe to know more than they actually do and these dense links foster the illusion of knowledge and the illusion of control . Results for 296 M&A deals reveal that ID is associated with a negative stock market reactions for different event windows considered, suggesting that they are value destructive in the short term, and sitting in more than one BoD even increases this result corroborating the hypothesis of managerial overconfident evaluations. The relevance of the members of the BoD is also analysed from the perspective of investors’ opinions and the impact of mass media on their expectations formation process. Focusing on the press, which nowadays still represents the most common information tool, a computational linguistic technique is applied to extract sentiment of 60.805 newspapers’ articles which mention Chairman, Vice – Chairman and Chief Executive Officer (CEO) of all Italian listed companies over the period 1998-2013, quantifying the positive and negative content for each article, and, therefore relate the content and corporate governance issues, such as CEO duality and celebrity status, to stock market reaction. Results reveal a negative market reaction to news related to B o a r d ’ s - C h a i r C E O s , and an even stronger negative one for negative news that mention Board’s-Chair CEOs, confirming a negative investors’ perception of CEO duality. The findings also show that c e l e b r i t y s t a t u s , associated to the ten most mentioned directors in the sixteen years analysed, and high level of visibility, do not elicit positive reactions from the audience as these variables have a strong, negative and statistically significant impact on stock market price

Strumenti alternativi di finanziamento per le Pmi: mini-bond, crowdfunding e business lending

Negli ultimi anni, i nuovi strumenti di finanziamento delle Pmi hanno conosciuto una significativa diffusione in Italia, anche grazie a nuove normative e a nuove piattaforme e operatori specializzati. I mini-bond hanno superato le 460 emissioni, di cui oltre metà di Pmi. Tra le varie forme di crowdfunding, le nuove piattaforme di lending cercano di sistematizzare la propria offerta e di far conoscere i punti di forza; anche se le dimensioni sono ancora circoscritte, testimoniano i primi passi per servire un mercato Pmi ampio e diversificato.New alternative financial instruments are developing in the Italian Smes market. Mini-bonds issuing is now a frequent operation, while the new business lending platforms are trying to establish their standards and to adapt to the different needs of Italian Smes

An Overview of Cooperative Banking in Europe

International audienc

CEO Duality: Newspapers and Stock Market Reactions

This study aims to investigate the unsettled issue of the relationship between CEO duality and a firm’s value through the perspective of investors’ reaction to news which mention apical directors with a single role and Board Chair CEOs. With a unique and hand-collected database of 60,805 newspaper articles, text-analysis, event-study and regression analysis methodologies were applied to capture news sentiment and study the direction and the magnitude of the stock market reaction. Results reveal that news mentioning Board Chair CEOs are negatively processed by investors, revealing a negative perception by investors about CEO duality. The study provides empirical support for the agency theory, in contrast to the stewardship theory, in the interpretation of CEO duality. It also proposes the methodology of systematically quantifying language to explore corporate governance issues and their link with financial markets

Determinants of Intra-group Interlocking in European listed business groups

Focusing on listed business groups, characterized by the presence of at least two affiliated-listed companies, and following the contingency perspective, this study aims to explore some determinants of intra-group interlockings (IgI). In particular, the study analyzes the controlling shareholder type (family, State, coalitions), the business ties, and the separation between ownership and control, focusing on 315 listed business groups in different European countries, i.e. Belgium, France, Greece, Italy, Spain, and Portugal. Social Network Analysis (SNA) is applied to these groups, to compare the networks that originate from corporate boards of directors. We find that in groups controlled by the State the density of social links is lower than in those controlled by families and coalitions. We also observe that the strength of IgI is related to the degree of correlation of firms’ industries, even if this correlation is influenced by the separation between ownership and control and by the country regulation that protects minority shareholders. This study contributes to the understanding on why board members of listed parent companies sit (or do not sit) on the listed subsidiary boards and, relying on agency theory and resource dependence theory, proposes a theoretical framework. The results show that for listed groups the agency theory better explains the determinants of the IgI phenomenon