Effects of CEO and COO overconfidence on the firm's inventory leanness

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bowon Kim ◽  
Jaeseog Na
Keyword(s):  
Inventory Management ◽  
Operations Management ◽  
Market Competition ◽  
Chief Executive ◽  
Stock Option ◽  
Behavioral Characteristics ◽  
Firm Level ◽  
Content Type ◽  
Top Managers ◽  
Managerial Overconfidence

PurposeThis study examines whether the behavioral attributes, such as overconfidence, of chief executive officers (CEO) and chief operating officers (COO) affect firm's inventory leanness. If they do, how are they interacting with each other? Moreover, incorporating market competition into the analysis, this study explores how the competition moderates the relationship between managerial overconfidence and inventory leanness.Design/methodology/approachUsing a large panel data of US manufacturing firms between 1998 and 2015, this study measures top managers' overconfident characteristics using stock option information. Then, a panel regression analysis is adopted to test the effects of managerial overconfidence on inventory leanness. Moreover, a moderation model is applied to investigate the interaction effects of market competition.FindingsFirms with overconfident COOs (CEOs), other circumstances being equal, increase (decrease) the inventory leanness as the market becomes more competitive.Practical implicationsThe study suggests that firms should understand top managers' behavioral characteristics to manage inventory efficiently. Collectively, CEOs (COOs) tend to increase (decrease) inventory levels due to their overconfidence as the market gets competitive. Firms should establish a systematic process to be reviewed by diverse stakeholders to deal with managerial overconfidence.Originality/valueThis study is an exploratory study that examines whether and how top management's behavioral attribute relates to a firm's operations performance. It underlines that CEO and COO's overconfident characteristics determine the inventory leanness when market competition is considered. Numerous studies on firm-level strategies emphasized the top managers' overconfidence as a key factor. However, behavioral characteristics at the top management level have rarely been studied in operations management fields. Based on the results, scholars could compare and understand the effects of CEO and COO overconfidence to provide insights into inventory management.

The relationship between narcissism, managerial overconfidence and comparability of financial statements of listed companies

2021 ◽  
Vol 19 (5) ◽  
pp. 681-700
Author(s):  
Mohammad Almaleki ◽  
Mahdi Salehi ◽  
Mahdi Moradi
Keyword(s):  
Stock Exchange ◽  
Chief Executive ◽  
Financial Statements ◽  
Business Environment ◽  
Multiple Regression Model ◽  
Content Type ◽  
Institutional Settings ◽  
Managerial Overconfidence ◽  
The Impact ◽  
The Relationship

Purpose This study aims to investigate the impact of managerial narcissism and overconfidence on financial statements’ comparability. In other words, this paper seeks to answer the question of whether the personality characteristics of managers may affect the level of financial statements’ quality of commercial entities or not. Design/methodology/approach The research hypotheses are tested using a sample of 896 observations taken from the Tehran Stock Exchange and 245 observations from the Iraqi Stock Exchange during 2012 and 2018 using the multiple regression model based on the combined data technique. Findings The findings show that managerial narcissism is positively and significantly associated with Iran’s financial statement comparability. In contrast, Iraqi data articulate a negative association between these two variables. This paper finds that Chief Executive Officer overconfidence and financial statements’ comparability are negatively related in both countries. Following the market variation, the different findings suggest that institutional settings such as the general managerial style, adopting international accounting standards (now IFRS) leading to the extent of auditing market globally in Iraq and suffering from international sanctions in Iran, the governing business environment may play an allocative role in preparing financial statements. Originality/value The present research is the first research conducted in two emerging markets (Iran and Iraq) examining the relationship between managers’ narcissism and overconfidence and financial statements’ comparability. Therefore, the present research in this area can significantly contribute to the development of science and knowledge.

The effect of effectuation and causation approach on entrepreneurial orientation in the presence of leader dominance and self-efficacy

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ma Jun ◽  
Fitri Rini Ariyesti ◽  
Sumran Ali ◽  
Peng Xiaobao
Keyword(s):  
Entrepreneurial Orientation ◽  
Self Efficacy ◽  
Scale Up ◽  
Chief Executive ◽  
Three Dimensions ◽  
Chinese Firms ◽  
Strategic Manoeuvring ◽  
Firm Level ◽  
Content Type ◽  
Leader Traits

Purpose Entrepreneurial orientation (EO) has witnessed a daunting rise in firm-level practices; to some extent, it has been augmented by the factors such as globalization and technological shift. The wide variety of literature has explained the importance of EO for firm performance. However, it has not yet been explored at a firm-level the approaches of causation and effectuation through the prism of leader traits such as leader dominance and self-efficacy as administrative ability and EO as strategic manoeuvring with strategic decisions obliged as a spin of firms. Design/methodology/approach The authors used the quantitative method to analyse the proposed relationships. For this reason, the authors targeted the Chinese firms to collect the data through the semi-structured survey from December 2020 to March 2021 and contributed to the literature by investigating 480 valid responses of leaders from Chinese firms. Findings The findings support the incorporated view of causation and effectuation on EO, which serve as vital strategic manoeuvring along with leader traits for firm stability and growth. Practical implications This study assists the decision-makers (including the top management team, Chief Financial Officer and Chief Executive Officer choose the particular approach (effectual or causal) to create the new venture/new product/new process or scale up the existing firm on another level for optimal benefits by considering their existing resources. Originality/value EO is a unidirectional process with three dimensions: innovativeness, proactiveness and risk-taking that could directly favour the firm by considering the well-known approaches (effectuation and causation) in crisis circumstances (like Covid-19). These approaches help the executives enhance their firm’s performance and maintain its sustainability and stability in crisis conditions by effectively using the available resources within its boundaries.

Wage-setting practices in the metalworking sector in Greece

2020 ◽  
Vol 42 (6) ◽  
pp. 1441-1463
Author(s):  
Daphne Nicolitsas
Keyword(s):  
Market Competition ◽  
Industrial Relations ◽  
Product Market ◽  
Structural Features ◽  
Collective Agreement ◽  
Wage Setting ◽  
Firm Level ◽  
Content Type ◽  
Level Information ◽  
And Performance

PurposeThe paper aims to link product market features in the Greek metal processing sector to the wage-setting practices followed therein.Design/methodology/approachAggregate business structural statistics are used to document the product market structure features while information from a rich sectoral collective agreement database, covering a number of sectors of the Greek economy, is used for the wage-setting practices. The approach is, in general, descriptive and discursive with the use of some regression analysis.FindingsThe main findings of the paper include: first, the metal sector as a whole is heterogeneous in terms of its structural/productive features; second, the type of collective agreements followed in the subsectors of the metal sector appear related to the structural features of the subsectors; third, negotiated wages appear binding for subsectors facing less product market competition; and finally, the ability to opt out of the sectoral agreement and sign firm-level agreements during the recent crisis in Greece was used mainly by firms suffering accounting losses.Research limitations/implicationsThe research results are limited by the absence of detailed firm-level information both on the actual wages paid and on the exact industrial relations practices in the workplace.Originality/valueIn view of the changes taking place in industrial relations in general and collective bargaining in particular, the issue of the homogeneity – in terms of structure and performance – of individual sectors, sets the question of whether one size (agreement) fits all and consequently whether extensions of agreements to whole sectors are advisable. This is the spirit in which the paper is written. The originality is linked both to the issue addressed but also to the use of the detailed collective labour agreements information and its association with product market features.

Chief Executive Officer's traits and open innovation in small and medium enterprises: the mediating role of innovation climate

2020 ◽  
Vol 27 (4) ◽  
pp. 607-631 ◽  
Author(s):  
Tharwa Najar ◽  
Karima Dhaouadi
Keyword(s):  
Open Innovation ◽  
Developing Economies ◽  
Chief Executive ◽  
Mediating Effect ◽  
High Tech ◽  
Content Type ◽  
Top Managers ◽  
Innovative Climate ◽  
Innovation Climate

PurposeThis paper aims to study the impact of Chief Executive Officer's (CEO's) personality traits on open innovation (OI) strategies and the mediating effect of innovation climate by mobilizing the upper echelons theory and the OI literature. In fact, CEO's role in OI promotion has been under-investigated in the literature especially in small and medium-sized enterprises (SMEs) and in developing economies.Design/methodology/approachBased on the structural equation modeling, a survey is scheduled by administrating a questionnaire within 178 CEOs in Tunisian high-tech sector. The relevance of the empirical evidences is to disclose human levers to the success of OI strategies in the Tunisian context as a developing country.FindingsThe results show the importance of CEO's entrepreneurial orientation (EO) and attitude in promoting innovation climate and so then OI strategies. The study offers a reading grid for managers of high-tech SMEs to better lead and identify key factors for OI adoption. Innovative climate is found to be a relevant driver of OI encompassing the key role of attitude and EO of top managers.Practical implicationsResults highlight the relevance of the recruitment of appropriate top managers with high levels of EO and with positive attitude toward OI in order to facilitate OI integration and to enhance SMEs' competitiveness. Entrepreneurially oriented CEOs should be required in order to overcome "Not Invented Here" and "Not Shared Here" syndromes, to support innovative climate and to encourage knowledge import and export in the Tunisian SMEs.Originality/valueThis paper sheds light on the micro-foundation of OI by emphasizing the relevance of human factors and namely EO and attitude of CEOs in OI issue. It provides conceptual and empirical clarification of the extent to which CEO's traits affect OI through innovative climate. This would value initiatives exploring key individual's characteristics influence on OI strategies within SMEs.

Choosing between the formal and informal economy: how do managers decide?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amine Abi Aad ◽  
James G. Combs
Keyword(s):  
Informal Economy ◽  
Regulatory Focus ◽  
Social Ties ◽  
Research Question ◽  
Formal Institutions ◽  
Firm Level ◽  
Content Type ◽  
Top Managers ◽  
New Research ◽  
Managerial Choice

PurposeWe raise and address an unexamined research question: Why do managers place some business activities in the formal economy and others in the informal? This firm-level managerial choice is most visible in emerging economies and is important due to its performance implications.Design/methodology/approachWe theorize that managers use social ties with formal institutions (e.g. parliament, central bank) to protect against (1) being singled out for enforcement and (2) opportunistic business partners, and that these protections allow managers to conduct more activities in the informal economy. Based on regulatory focus theory, we also submit that managers with a promotion (prevention) focus mindset are more (less) prone to use their social ties with formal institutions to emphasize the informal economy. Hypotheses are tested using survey data from 362 Lebanese top managers.FindingsManagers' social ties with formal institutions relate positively to their propensity to use the informal economy, and managers with a promotion mindset are more willing and those with a prevention mindset are less willing to leverage their social ties with formal institutions to conduct activities in the informal economy.Originality/valueOur study raises an important new research question at the intersection of strategic and international management and offers an initial answer. Working within the informal economy requires informal social ties among informal actors, but for formally registered firms, entry into the informal economy requires informal ties with formal actors.

Board gender diversity and the timing of CEO stock option awards

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moncef Guizani ◽  
Ahdi Noomen Ajmi
Keyword(s):  
Stock Price ◽  
Gender Diversity ◽  
Chief Executive ◽  
Stock Option ◽  
Content Type ◽  
Instrumental Variable Analysis ◽  
Compensation Committee ◽  
Female Directors ◽  
Research Findings ◽  
Board Gender Diversity

Purpose This study aims to explore the role of board gender diversity in mitigating chief executive officer (CEO) luck. CEOs are “lucky” when they receive stock option grants on days when the stock price is the lowest in the month of the grant, implying opportunistic timing. Design/methodology/approach This study uses a logistic regression analysis and an instrumental-variable analysis. The sample consists of 3,249 firm-year observations from 2010 through 2015. Findings The results show that female directors significantly deter the opportunistic timing of option grants. This study finds that gender diversity – as measured by the percentage of women on the board, the percentage of female independent directors and the percentage of female directors on the compensation committee are likely to reduce the odds that CEOs receive opportunistically timed lucky grants. The results are consistent with those in prior research that documents the benefits of board gender diversity. Practical implications The research findings are beneficial to policymakers and regulators, as it allows them to assess the importance of diversity on boards in the monitoring of the managers, particularly as it pertains to the design of CEO compensation packages. Furthermore, these findings have implications for Ibero-American countries as they shed light on the importance to undertake measures and reforms to promote board effectiveness by the introduction of gender diversity. Originality/value While prior research has examined the effect of board gender diversity on firm performance, the study is the first to investigate the effect of female directors on the opportunistic timing of option grants, using a rigorous empirical framework that explicitly accounts for endogeneity.

CEO transformational leadership and top manager ambidexterity

2015 ◽  
Vol 36 (8) ◽  
pp. 927-954 ◽  
Author(s):  
Ci-Rong Li ◽  
Chen-Ju Lin ◽  
Yun-Hsiang Tien
Keyword(s):  
Transformational Leadership ◽  
Risk Propensity ◽  
Senior Managers ◽  
Firm Level ◽  
Content Type ◽  
Behavioral Integration ◽  
Individual Level ◽  
Top Managers ◽  
Top Manager ◽  
The Individual

Purpose – The purpose of this paper is to explore the role of CEO transformational leadership in promoting ambidexterity of top managers. This paper posits that connecting CEO transformational leadership with the CEO-top manager interface offers a better explanation of heterogeneity in top manager ambidextrous behavior. Design/methodology/approach – This study is based on a questionnaire survey of 388 senior managers in 80 top teams nested in 80 small- to medium-sized Taiwan manufacturing firms. Findings – The findings indicate that transformational CEOs shape the CEO-top manager interface, characterized by senior team behavioral integration, decentralization of responsibilities, long-term compensation, and individual manager risk propensity, and in turn promote ambidexterity at the individual top manager level. Originality/value – Hence, the authors contribute to the existing understanding that transformational CEOs may not only have a beneficial influence on firm-level ambidexterity, but also may be particularly effective in enabling individual-level top managers to simultaneously explore and exploit.

scholarly journals CEO power and R&D investment

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Christine Naaman ◽  
Li Sun
Keyword(s):  
Chief Executive ◽  
Ordinary Least Squares ◽  
Financial Accounting ◽  
Least Squares Regression ◽  
Ceo Power ◽  
Firm Level ◽  
Content Type ◽  
Negative Relation ◽  
The Impact ◽  
D Investment

Purpose This study aims to examine whether and how the power of a chief executive officer (CEO) relates to firm-level research and development (R&D) investment. Design/methodology/approach The authors use clustered standard errors ordinary least squares regression using a large sample of US firms from 1994 to 2017. Findings The authors find a significant negative relation between CEO power and R&D investment, suggesting that firms with more powerful CEOs are less likely to invest in R&D activities. Besides, the study finds that this significant negative relation is largely driven by firms with weaker corporate governance. Originality/value This study contributes to the finance literature on the impact and consequences of having powerful CEOs and the financial accounting literature on the determinants of R&D expenditures.

scholarly journals Capital market penalties to radical and incremental innovation

2019 ◽  
Vol 23 (2) ◽  
pp. 291-313 ◽  
Author(s):  
Daniel Stefan Hain ◽  
Jesper Lindgaard Christensen
Keyword(s):  
Small Firms ◽  
Probit Model ◽  
Radical Innovation ◽  
Incremental Innovation ◽  
Behavioral Characteristics ◽  
Firm Level ◽  
Content Type ◽  
External Finance ◽  
Innovation Activities ◽  
Negative Effect

Purpose The purpose of this paper is to investigate how access to financing for incremental as well as radical innovation activities is affected by firm-specific structural and behavioral characteristics. Design/methodology/approach Deploying a two-stage Heckman probit model on survey data spanning the period 2000–2013 and covering 1,169 firms, this paper analyzes the effect of a firm’s engagement in incremental and radical innovation on its likelihood to get constrained in their access to external finance, and how this effect is moderated by the firm’s age and size. Findings In line with earlier research, it is confirmed that the type of innovation matters for the access to external finance, but in a more nuanced way than generally portrayed. While incremental innovation activities have little negative effect on the access to external finance, radical innovation activities tend to be penalized by capital markets. This effect appears to be particularly strong for small firms. Originality/value This paper provides nuanced insights into the interplay between types of firm-level innovation activities, structural characteristic and access to external finance.

Managerial overconfidence, firm transparency, and stock price crash risk

2019 ◽  
Vol 10 (3) ◽  
pp. 271-296
Author(s):  
Quanxi Liang ◽  
Leng Ling ◽  
Jingjing Tang ◽  
Haijian Zeng ◽  
Mingming Zhuang
Keyword(s):  
Stock Price ◽  
Fixed Effects ◽  
Multiple Linear Regression Model ◽  
Chief Executive ◽  
Bad News ◽  
Good News ◽  
Crash Risk ◽  
Fixed Effects Model ◽  
Content Type ◽  
Managerial Overconfidence

Purpose The purpose of this paper is to empirically analyze whether and how managerial overconfidence affects stock price crash risk. Design/methodology/approach Based on a large sample of Chinese non-state-owned firms from 2000 to 2012, this study employs methods including multiple linear regression model, Heckman two-stage treatment effect procedure, firm fixed effects model and event study to clarify the causality relationship between managerial overconfidence and crash risk. Findings The authors find that firms with overconfident managers (chief executive officer or board chairs) are more likely to experience future stock price crashes than firms with non-overconfident managers. The effect of overconfidence on crash risk is more pronounced for firms with low transparency, suggesting that firm opacity facilitates overconfident managers’ bad news hoarding activities, which, in turn, increases stock price crash risk. The authors also show evidence that overconfident managers tend to disclose good news in a timely manner. Originality/value The authors add to the growing literature on stock price crash risk. Specifically, the authors find that the cognitive bias of board chair plays an important role in the bad news hoarding activities, thereby increasing the likelihood of stock price crash. This study also contributes to the literature that addresses the effects of managerial overconfidence on corporate finance issues.

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