Valuation Effects Of Overconfident Ceos On Corporate Diversification And Refocusing Decisions
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Valuation Effects Of Overconfident Ceos On Corporate Diversification And Refocusing Decisions
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Author : Panayiotis C. Andreou
language : en
Publisher:
Release Date : 2019
Valuation Effects Of Overconfident Ceos On Corporate Diversification And Refocusing Decisions written by Panayiotis C. Andreou and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
This study presents a theoretical model that links chief executive officer (CEO) overconfidence to the value loss of corporate diversification. Consistent with the model's prediction, the findings show that diversified firms run by overconfident CEOs experience value loss compared to diversified firms run by their rational counterparts. Empirically, the value loss is economically significant and ranges between 12.5% and 14.1%. In addition, the model predicts heightened corporate refocusing activity by overconfident CEOs who pursued diversified investments in the past once realized returns fail to match initial expectations. The empirical odds of corporate refocusing decisions are 67% to 98% higher when past diversifications are undertaken by overconfident rather than rational CEOs. Another prediction of the model is that overconfident CEOs exhibit preference for diversified investments, especially in the presence of ample internal funds. This prediction is also strongly supported by the data. Overall, this study proposes CEO overconfidence as a unified and consistent explanation of why firms pursue value-destructive corporate diversification policies and later adopt refocusing policies aiming to restore value.
The Effect Of Founder Ceo Overconfidence On Merger Premium
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Author : Christoph Meyer
language : en
Publisher: GRIN Verlag
Release Date : 2015-05-08
The Effect Of Founder Ceo Overconfidence On Merger Premium written by Christoph Meyer and has been published by GRIN Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-05-08 with Business & Economics categories.
Master's Thesis from the year 2014 in the subject Business economics - Investment and Finance, grade: 1,0, Heriot-Watt University Edinburgh (Finance), course: Corporate Finance, language: English, abstract: Theoretical and empirical research has indicated that overconfidence affects merger decision-making and merger premium. However, founder-CEOs have not been subject of such a study, yet. This lack is particular surprising when considering the differences between founder and manager-CEOs as well as the media attention of founder-CEOs. The present dissertation aims to fill the research gap through investigating the effect of founder-CEO overconfidence on merger premium in the high-tech industry. Moreover, this dissertation aims to extend the literature by including target CEO overconfidence and studying the impact on merger premium when both, acquirer and target CEO are overconfident. By studying founder-CEOs this dissertation also aims to establish the effectiveness of founders as CEOs. The resource-based perspective argues that while founders help in the early years of the company, they become less effective as the firm evolves, since they lack the necessary management skills. Design/methodology/approach – Using ordinary least square (OLS) technique, this study investigates the effects of implemented factors in determining the merger premium paid in high-tech acquisitions. A sample consisting of 245 acquisitions in the high-tech industry of 124 CEOs during a 19-year period (1995 to 2013) has been observed. In order to test the founder-CEO effects, this dissertation develops a matched sample approach of 62 founder-CEOs and 62 manager-CEOs. This study shows a strong relationship between CEO overconfidence and acquisitions premium paid. The results suggest that the CEO overconfidence may provide an explanation for the well-rehearsed overpayment problem. An additional analysis indicates that the highest premium is paid when combined acquiring and tar-get firm CEO overconfidence exist. The dissertation also shows that founder-CEOs pay higher premia than manager-CEOs in the high-tech industry. It has been proven that founder-CEOs’ decisions are more independent from interventions of the board of directors and that founder-CEO overpayment is not dependent on the company’s size or relatedness of mergers. The findings are reliable as the results remain constant for applied robustness tests.
Managerial Expertise Corporate Decisions And Firm Value
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Author : Sheng Huang
language : en
Publisher:
Release Date : 2014
Managerial Expertise Corporate Decisions And Firm Value written by Sheng Huang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
This paper investigates how managerial expertise -- specifically, industry expertise -- affects firm value through divestiture. Using CEOs' managerial experiences in industries throughout their careers as a measure of their industry expertise, I find that CEOs in diversified conglomerates are more likely to divest divisions in industries in which they have less experience. This finding is consistent with CEOs who divest such divisions in order to refocus on those divisions in which they have specialized -- that is, to achieve a better match between their expertise and their firms' retained assets. Firms that divest for a better CEO-firm match experience significant improvements in operating performance, as well as significant abnormal stock returns that persist for an average of three years following a divestiture. Further, among firms that divest for a better match, those firms with more experienced CEOs realize greater gains in firm value. In contrast, divestitures that increase corporate focus, but do not improve the expertise-asset match, do not lead to long-run increases in firm value.
Affect And Cognition In Upper Echelons Strategic Decision Making Empirical And Theoretical Studies For Advancing Corporate Governance
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Author : Matteo Cristofaro
language : en
Publisher: Frontiers Media SA
Release Date : 2023-02-15
Affect And Cognition In Upper Echelons Strategic Decision Making Empirical And Theoretical Studies For Advancing Corporate Governance written by Matteo Cristofaro and has been published by Frontiers Media SA this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-02-15 with Science categories.
Consumer Behavior In The Internet Era
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Author : Gong Sun
language : en
Publisher: Frontiers Media SA
Release Date : 2022-11-28
Consumer Behavior In The Internet Era written by Gong Sun and has been published by Frontiers Media SA this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-11-28 with Science categories.
Reference Book Of Corporate Managements
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Author : Dun and Bradstreet, inc
language : en
Publisher:
Release Date : 1993
Reference Book Of Corporate Managements written by Dun and Bradstreet, inc and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993 with Corporations categories.
Behavioral Corporate Finance
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Author : Hersh Shefrin
language : en
Publisher: College Ie Overruns
Release Date : 2017-04-16
Behavioral Corporate Finance written by Hersh Shefrin and has been published by College Ie Overruns this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-04-16 with Corporations categories.
The Self In Social Judgment
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Author : Mark D. Alicke
language : en
Publisher: Psychology Press
Release Date : 2013-05-13
The Self In Social Judgment written by Mark D. Alicke and has been published by Psychology Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-05-13 with Psychology categories.
The volume begins with a historical overview of the self in social judgment and outlines the major issues. Subsequent chapters, all written by leading experts in their respective areas, identify and elaborate four major themes regarding the self in social judgment: · the role of the self as an information source for evaluating others, or what has been called 'social projection' · the assumption of personal superiority as reflected in the pervasive tendency for people to view their characteristics more favorably than those of others · the role of the self as a comparison standard from or toward which other people's behaviors and attributes are assimilated or contrasted · the relative weight people place on the individual and collective selves in defining their attributes and comparing them to those of other people
Managerial Overconfidence Different Thinking Through Different Education
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Author : Maximilian Margolin
language : en
Publisher: Anchor Academic Publishing (aap_verlag)
Release Date : 2014-02-01
Managerial Overconfidence Different Thinking Through Different Education written by Maximilian Margolin and has been published by Anchor Academic Publishing (aap_verlag) this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-02-01 with Business & Economics categories.
In literature, overconfidence has been blamed for economic bubbles and crises as well as for international conflicts and wars. While education has already been shown to impact one’s level of overconfidence previous research focused on the length and profoundness of education. This study, in contrast, examines the connection between overconfidence and the field in which a person has been educated. The issues covered are therefore how education and mind set are related, why a differentiation between “quantitative” and “qualitative” education makes sense in this context, and how different mind-sets influence an individual’s proneness to overconfidence. Drawing on the dual process concept of reasoning from psychology it is argued that the focus of one’s education may have an influence on individual levels of overconfidence through distinct ways of reasoning that are acquired and practiced during higher education. As support for this theory, data on the overconfidence of CEOs of the largest German companies is used and experiments for future research on this topic are suggested.
Handbook Of The Economics Of Finance
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Author : G. Constantinides
language : en
Publisher: Elsevier
Release Date : 2003-11-04
Handbook Of The Economics Of Finance written by G. Constantinides and has been published by Elsevier this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003-11-04 with Business & Economics categories.
Arbitrage, State Prices and Portfolio Theory / Philip h. Dybvig and Stephen a. Ross / - Intertemporal Asset Pricing Theory / Darrell Duffle / - Tests of Multifactor Pricing Models, Volatility Bounds and Portfolio Performance / Wayne E. Ferson / - Consumption-Based Asset Pricing / John y Campbell / - The Equity Premium in Retrospect / Rainish Mehra and Edward c. Prescott / - Anomalies and Market Efficiency / William Schwert / - Are Financial Assets Priced Locally or Globally? / G. Andrew Karolyi and Rene M. Stuli / - Microstructure and Asset Pricing / David Easley and Maureen O'hara / - A Survey of Behavioral Finance / Nicholas Barberis and Richard Thaler / - Derivatives / Robert E. Whaley / - Fixed-Income Pricing / Qiang Dai and Kenneth J. Singleton.