CEO Overconfidence and International Merger and Acquisition Activity

AbstractThis study examines the role that chief executive officer (CEO) overconfidence plays in an explanation of international mergers and acquisitions during the period 2000–2006. Using a sample of CEOs of Fortune Global 500 firms over our sample period, we find that CEO overconfidence is related to a number of critical aspects of international merger activity. Overconfidence helps to explain the number of offers made by a CEO, the frequencies of nondiversifying and diversifying acquisitions, and the use of cash to finance a merger deal. Although overconfidence is an international phenomenon, it is most extensively observed in individuals heading firms headquartered in Christian countries that encourage individualism while de-emphasizing long-term orientation in their national cultures.

Download Full-text

The Exploratory Mindset and Corporate Innovation

Journal of Financial and Quantitative Analysis ◽

10.1017/s0022109020000800 ◽

2020 ◽

pp. 1-43

Author(s):

Zhaozhao He ◽

David Hirshleifer

Keyword(s):

Research And Development ◽

Chief Executive Officer ◽

Stock Prices ◽

Operating Performance ◽

Chief Executive ◽

Market Reactions ◽

Managerial Incentive ◽

Corporate Innovation ◽

Long Run

Abstract We propose that chief executive officer (CEO) exploratory mindset (inherent desire to search for novel ideas and long-term orientation) promotes innovation. Firms with CEOs with PhD degrees (PhD CEOs) produce more exploratory patents with greater novelty, generality, and originality. PhD CEOs engage less in managing earnings and stock prices, invest more in research and development (R&D) and alliances, generate higher long-term value of patents, and experience more positive market reactions to R&D alliances. Their firms achieve superior long-run operating performance. They tend to be hired by research-intensive firms with poor financial performance. Evidence from managerial incentive shocks and turnovers suggests that these effects do not derive solely from CEO–firm matching.

Download Full-text

Financially Qualified Members in an Upper Echelon and Their Relationship with Corporate Sustainability: Evidence from an Emerging Economy

Sustainability ◽

10.3390/su10124697 ◽

2018 ◽

Vol 10 (12) ◽

pp. 4697 ◽

Cited By ~ 2

Author(s):

Ashfaque Banbhan ◽

Xinsheng Cheng ◽

Nizam Ud Din

Keyword(s):

Earnings Management ◽

Agency Theory ◽

Chief Executive Officer ◽

Corporate Sustainability ◽

Chief Executive ◽

Top Management Teams ◽

Audit Committees ◽

Upper Echelon ◽

Board Diversity

Non-observable board diversity is an important organizational strategy for improving the long-term growth and survivability of firms. The involvement of corporate sustainability (CS) in top management teams has led to effective boards. By using agency theory, we stress how financially qualified directors (FQD) in audit committees (ACs) may positively or negatively affect the practice of earnings management (EM). We also use various theories to explain how a powerful chief executive officer (CEO) complicates the effectiveness of AC and reduces their ability to detect EM practices. Using a sample of 1020 firm-year observations representing 204 non-financial listed Pakistani firms during 2013–2017, we find that the presence of FQD on the AC is associated with lower levels of EM. Our analysis shows that this effect is driven by the level of FQDs’ accounting knowledge.

Download Full-text

CEO compensation, incentive alignment, and carbon transparency

Journal of International Accounting Research ◽

10.2308/jiar-2020-032 ◽

2021 ◽

Author(s):

Le Luo ◽

Hongjun Wu ◽

Chuyue Zhang

Keyword(s):

Climate Change ◽

Rule Of Law ◽

Chief Executive Officer ◽

Legal System ◽

Positive Relationship ◽

Chief Executive ◽

Compensation Contracts ◽

Stakeholder Interests ◽

Executive Incentives

We examine whether chief executive officer compensation aligned with stakeholders’ interests is associated with enhanced corporate carbon transparency. Using an international sample obtained from the CDP, we find that corporate carbon transparency—as measured by both the propensity to voluntarily disclose carbon information and the quality and comprehensiveness of the disclosure—is greater when managers’ compensation contracts are better aligned with stakeholder interests. Further analyses indicate that this positive relationship is stronger in countries or regions with a code law legal system, with an inefficient rule of law, that show strong social norms toward climate change, that feature collectivist societies, and that have a long-term orientation. These findings indicate that the stakeholder agency problem of voluntary carbon disclosure can be addressed through executive incentives that are aligned with stakeholders’ interests.

Download Full-text

Inside Debt and Mergers and Acquisitions

Journal of Financial and Quantitative Analysis ◽

10.1017/s0022109014000593 ◽

2014 ◽

Vol 49 (5-6) ◽

pp. 1365-1401 ◽

Cited By ~ 51

Author(s):

Hieu V. Phan

Keyword(s):

Mergers And Acquisitions ◽

Stock Returns ◽

Risk Taking ◽

Chief Executive ◽

Wealth Transfer ◽

Inside Debt ◽

Bond Returns ◽

Abnormal Stock Returns ◽

Corporate Risk

AbstractI empirically investigate the relation between chief executive officer (CEO) inside debt holdings and mergers and acquisitions (M&As), and find evidence consistent with the agency theory’s prediction of a negative relation between CEO inside debt holdings and corporate risk taking. Further analysis shows that CEO inside debt holdings are positively correlated with M&A announcement abnormal bond returns and long-term operating performance, but negatively correlated with M&A announcement abnormal stock returns. Finally, I find evidence that acquirers restructure the postmerger composition of CEO compensation that mirrors their capital structure in order to alleviate incentives for wealth transfer from shareholders to bondholders or vice versa.

Download Full-text

APA Names Diaz-Granados Deputy Chief Executive Officer

PsycEXTRA Dataset ◽

10.1037/e500672019-001 ◽

2018 ◽

Keyword(s):

Chief Executive Officer ◽

Chief Executive

Download Full-text

Peregrine—Twenty Years of Fraudulent Cash Balances

Issues in Accounting Education ◽

10.2308/iace-50690 ◽

2013 ◽

Vol 29 (2) ◽

pp. 337-348

Author(s):

Randal J. Elder ◽

Diane J. Janvrin ◽

Paul Caster

Keyword(s):

Information System ◽

Chief Executive Officer ◽

Accounting Information ◽

Chief Executive ◽

Cash Balance ◽

Accounting Information System

ABSTRACT In July 2012, Peregrine Financial Group filed for bankruptcy following the discovery that $215 million in customer balances had been embezzled. Investigation revealed that its Chief Executive Officer, Russell Wasendorf, Sr., fooled auditors and regulators for 20 years by preparing fictitious bank statements and cash balance confirmations to hide the theft of cash. The fraud was uncovered when Peregrine's regulator, the National Futures Association (NFA), demanded that Peregrine participate in an electronic confirmation process for verification of customer accounts. This case discusses how the fraud was allowed to go undetected for 20 years, the importance of auditing cash, and how new electronic confirmation technology improves the ability to authenticate confirmation responses. The case is suitable for use in both auditing and accounting information system courses.

Download Full-text