scholarly journals Behavioral CEOs: The Role of Managerial Overconfidence

2015 ◽  
Vol 29 (4) ◽  
pp. 37-60 ◽  
Author(s):  
Ulrike Malmendier ◽  
Geoffrey Tate
Keyword(s):  
Empirical Evidence ◽  
Investment Decisions ◽  
Corporate Investment ◽  
Financing Constraints ◽  
Managerial Overconfidence ◽  
Empirical Framework

In this paper, we provide a theoretical and empirical framework that allows us to synthesize and assess the burgeoning literature on CEO overconfidence. We also provide novel empirical evidence that overconfidence matters for corporate investment decisions in a framework that explicitly addresses the endogeneity of firms' financing constraints.

Stock mispricing and investment decisions: evidence from Pakistan

2018 ◽  
Vol 16 (4) ◽  
pp. 725-741
Author(s):  
Usman Muhammad ◽  
Sana Saleem ◽  
Anwar ul Haq Muhammad ◽  
Faiq Mahmood
Keyword(s):  
Stock Exchange ◽  
Random Effect ◽  
Investment Decisions ◽  
Corporate Investment ◽  
Capital Expenditures ◽  
Content Type ◽  
Financial Firms ◽  
Stock Mispricing ◽  
The Impact

Purpose This study aims to examine the impact of stock mispricing on corporate investment decisions by taking the sample of non-financial firms listed on the Pakistan Stock Exchange during the period of 2008-2014. Design/methodology/approach To measure the mispricing, this study decomposes the market-to-book ratio into mispricing and growth components and measures corporate investment by capital expenditures. Fixed and random effect panel regression models are used to estimate the results. Findings Results of the study show that firms issue overvalued equity to finance the capital expenditures. Consistent with other studies, the relationship between stock mispricing and investment is more prominent in the financially constrained firms. In addition, cash flow investment sensitivity is higher in financially unconstrained firms. Practical implications Nonetheless, the results give important implications to the Pakistan Stock Market on how the mispricing enhances the welfare by relaxing the financial constraints and allowing the managers to make investment in profitable projects that otherwise go non-funded. These findings have interesting implications for further research in the literature of finance and also help in economic policy-making. Originality/value This study finds the impact of stock mispricing on corporate investment decisions by considering the role of market timing in the context of Pakistan.

Product market competition and corporate investment decisions

2015 ◽  
Vol 14 (2) ◽  
pp. 128-148 ◽  
Author(s):  
Indrarini Laksmana ◽  
Ya-wen Yang
Keyword(s):  
Risk Taking ◽  
Market Competition ◽  
Investment Decisions ◽  
Product Market ◽  
Corporate Investment ◽  
Product Market Competition ◽  
Term Survival ◽  
Content Type ◽  
Risky Investment

Purpose – The study aims to examine the association between product market competition and corporate investment decisions on, particularly, risk-taking and investment efficiency. Existing theoretical studies on whether product market competition mitigates or exacerbates agency problems are inconclusive. Prior research generally finds that competition constrains management opportunism in reporting operating performance. However, the association between product market competition and managerial investment decisions has largely been unexplored. Design/methodology/approach – The primary measure of product market competition is the Herfindahl–Hirschman Index. The authors use regression analysis to examine the association between corporate risk-taking and over-investment of free cash flow (FCF) (as dependent variables) and product market competition (as an independent variable). Findings – Using firm-year observations from 1990 to 2010, the authors find that competition encourages managers to invest in risky investment. They also find that competition disciplines management on its use of FCFs. Overall, their results provide support for the disciplining role of product market competition in management investment decisions. The results are robust after they control for shareholder activism and executive compensations. Originality/value – The paper contributes to the literature by providing evidence of the disciplining role of product market competition in management investment decisions. First, the results suggest that competition encourages managers to invest in risky investment. One potential explanation for the results is that competition reduces opportunities for resource diversion for management personal benefits and, in turn, decreases management risk aversion. Another explanation is that competition forces management to take more risks for the long-term survival of the company. Second, the results indicate that competition disciplines management on its use of FCFs. Although firms in highly competitive industries make investment decisions that are less conservative, they tend to avoid suboptimal investment decisions, such as over-investment of FCF, compared to their counterparts.

Peran kepemilikan institusional, perencanaan pajak dan dewan komisaris asing terhadap nilai perusahaan

2019 ◽  
Vol 8 (2) ◽  
Author(s):  
Anita Ade Rahma ◽  
Lisa Nabawi ◽  
Ronni Andri Wijaya
Keyword(s):  
Significant Influence ◽  
Firm Value ◽  
Stock Exchange ◽  
Investment Decisions ◽  
Total Sample ◽  
Tax Planning ◽  
Purposive Sampling ◽  
Institutional Leadership ◽  
Company Value

The purpose of this study is to analyze the role of institutional leadership, tax planning and foreign board of commissioners on firm value. The population in this study were 615 companies listed on the Indonesia Stock Exchange in 2015-2017. The sample was chosen using purposive sampling to get a total sample of 325 companies with a total of 975 observations of company data. The results of this study indicate that institutional leadership and tax planning have no role in increasing company value. While the foreign board of commissioners showed a significant influence on the value of the company. This proves that there is a need for diversity in the structure of the board that can trigger an increase in the value of the company. In addition, the presence of a foreign board is needed for the progress of the companyKeywords: Investment decisions; funding decisions; dividend policy; company value

Membangun Fondasi Keilmuan Ekonomi Islam: Telaah Metodologi Muhammad Akram Khan

2017 ◽  
Vol 1 (2) ◽  
pp. 152-170
Author(s):  
Ahmad Ubaidillah
Keyword(s):  
General Theory ◽  
Empirical Evidence ◽  
Inductive Method ◽  
Ethical Values ◽  
Institutional Conditions ◽  
Faith Based ◽  
Behavioral Parameters ◽  
Science Methodology ◽  
Islamic Society

Throughout my experience in tracking down and reading books on faith-based economics, in this case Islam, there are no books that specifically list the title of "Islamic economics". If there is, it is only initiated or introduced. Most books coming down to us still use the titles starting with the word, for example, system, concept, principle, or the doctrine of Islamic economics. Why do the authors of the book Islamic economics seem not dared to give his book title with label "science"? I presume that Islamic economics has not been considered as a science. In building a science, methodology is required. Islamic Economics also requires a well-established methodology to build the foundation of science. The study answers questions; how is methodology which is offered by Muhammad Akram Khan to build Islamic economics. The method used in this research is the study of literature with qualitative approach.The result of study concludes that Khan offers methodology of Islamic economics, if summarized, written as follows: First, Islamic economics uses a framework derived from the texts of divinity (revelation). Second, Islamic economics uses the inductive method, which gives witness to the truth or falsity assumptions and predictions about the two criteria of rationality and empirical evidence. Third, Islamic economy is built on ethical values ​​such as justice, virtue, moderation, sacrifice, caring for others, in the analysis, as behavioral parameters. Fourth, Islamic economics is a normative discipline. Islamic Economics investigates ways and means to change the existing economy with Islamic economy. Fifth, Islamic economics ask different questions with conventional economics. Its attention is on welfare (falah) human and creating social and institutional conditions that maximize falah in society. Clearly, Islamic economics strongly supports research programs that help maximize falah. Furthermore, Khan elaborates several issues related to the methodology that often appears in the forum of Islamic economists. There are some problems that Khan proposes, they are the interaction with modern economics, the role of revelation, assuming ideal Islamic society, and the general theory of Islamic economics.

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