In this study, we examine the effects of the degree of CEO optimism on their risk-taking behaviors and on firm value and show that CEOs with low overconfidence tend to take on more risk (in terms of ...tail risk) and have a lower Tobin’s Q than companies whose CEOs have moderate or high overconfidence. To do so, we use a sample of life insurance companies divided into three subsamples, based on the degree of CEO overconfidence (OC): low OC, moderate OC, and high OC. Our additional analyses indicate that, before the 2008 global financial crisis, all three OC subsamples have a positive effect on Tobin’s Q from the net credit default swap (CDS) sell positions. But, after the financial crisis, all the three OC groups use CDS to reduce firms’ risk-taking behavior, rather than to increase firm value.
While publicly-available datasets often document how much fossil fuel is extracted within oil-producing countries, they do not generally indicate who is responsible. To address this gap, we ...constructed the Global Oil and Gas Extraction Network, a dataset containing the extraction sites of the 26 largest oil and gas companies, and the quantities extracted annually from 2014 to 2018, accounting for 67% of total production. Using this dataset, we present a first-of-its-kind network analysis of global oil and gas extraction. We find fifty-eight percent of operations involved joint ownership across companies, demonstrating growing interdependence after industry-wide losses in 2016. Countries in which National Oil Companies (NOCs) were active were less likely to host Hybrid state-investor companies, and even less likely to host Investor-Owned Companies (IOCs), while certain Hybrids and IOCs tended to operate in the same countries; both trends became more pronounced between 2014 and 2018. Reflecting colonial legacies, the seven Big Oil companies, headquartered in either the US or Europe, extracted oil and gas from the most countries. These findings reveal a complex global network of strategically aligned actors, indicative of tacit and explicit transnational industry-state collusion to obstruct climate policies. These findings additionally underscore the need for comprehensive data to support a managed fossil fuel phaseout.
•Open data on global extraction are urgently needed to govern the phaseout of fossil fuels.•Global Oil and Gas Extraction Network dataset has >5000 extraction sites for top 26 companies.•First-of-its-kind network analysis shows transnational state-firm interdependence.
Despite the consensus on the negative country-level implications of corruption, its consequences for firms are less understood. This study examines the effect of bribery on the innovative performance ...of firms in emerging markets as reflected by new product introductions. I argue that bribery may help innovators in these markets to introduce new products by overcoming bureaucratic obstacles, compensating for the lack of kinship or political affiliations, and hedging against political risk. I also propose that the relationship between firm bribery and new product introduction will be negatively moderated (i.e., weakened) by the quality of the formal and informal institutions in place. Employing data from over 6,000 firms in 30 emerging markets and a wide range of empirical tests, my results support these hypotheses. These findings extend transaction costs economics by showing that bureaucratic obstacles and uncertainty can drive firms into illegal cost minimization strategies. Moreover, they augment institutional theory by expounding upon the ways that norms and informal practices moderate the efficiency of firm strategies in emerging markets.
Results of a survey of 211 founders of small and medium-sized enterprises (SMEs) indicated that family involvement in the firm was indirectly related to four entrepreneurial outcomes (business ...performance, strategic planning, satisfaction with business success, and commitment to remain self-employed) through family-to-business support, suggesting a particular benefit of the intertwining of family and business in family firms. SME founders who owned family firms experienced higher levels of family-to-business support than those who owned nonfamily firms. These results support our proposed alignment of the social support perspective of well-being and resiliency with the family embeddedness perspective of the family-business relationship.
Across a wide set of nongroup insurance markets, applicants are rejected based on observable, often high-risk, characteristics. This paper argues that private information, held by the potential ...applicant pool, explains rejections. I formulate this argument by developing and testing a model in which agents may have private information about their risk. I first derive a new no-trade result that theoretically explains how private information could cause rejections. I then develop a new empirical methodology to test whether this no-trade condition can explain rejections. The methodology uses subjective probability elicitations as noisy measures of agents' beliefs. I apply this approach to three nongroup markets: long-term care, disability, and life insurance. Consistent with the predictions of the theory, in all three settings I find significant amounts of private information held by those who would be rejected; I find generally more private information for those who would be rejected relative to those who can purchase insurance, and I show it is enough private information to explain a complete absence of trade for those who would be rejected. The results suggest that private information prevents the existence of large segments of these three major insurance markets.
While patent litigation is an important appropriability mechanism for protecting firms' proprietary knowledge, through the litigation process, valuable knowledge may unintentionally spill over from ...firms defending their patents to those they accuse of patent infringement. We examine whether such spillover subsequently enhances the innovation of accused firms by analyzing over 3,000 patent litigation cases from 1998 through 2015 in the U.S. pharmaceutical industry. We find that firms accused of infringement have higher levels of innovation following litigation relative to other similar firms. Furthermore, litigation of patents that build on recent and heterogeneous knowledge and are characterized by greater scope more strongly enhance the accused firms' subsequent innovation. These findings support the argument that patent litigation can facilitate knowledge spillovers.
Recent study shows that the accuracy of the k-shell method in determining node coreness in a spreading process is largely impacted due to the existence of core-like group, which has a large k-shell ...index but a low spreading efficiency. Based on the analysis of the structure of core-like groups in real-world networks, we discover that nodes in the core-like group are mutually densely connected with very few out-leaving links from the group. By defining a measure of diffusion importance for each edge based on the number of out-leaving links of its both ends, we are able to identify redundant links in the spreading process, which have a relatively low diffusion importance but lead to form the locally densely connected core-like group. After filtering out the redundant links and applying the k-shell method to the residual network, we obtain a renewed coreness ks for each node which is a more accurate index to indicate its location importance and spreading influence in the original network. Moreover, we find that the performance of the ranking algorithms based on the renewed coreness are also greatly enhanced. Our findings help to more accurately decompose the network core structure and identify influential nodes in spreading processes.
Schemas are a central concept in strategy and organization theory. Yet, despite the importance of schemas, little is known about how they emerge. Our in-depth historical analysis of how groups in the ...life insurance industry developed their schema for the computer from 1945—1975 addresses this gap. We identify three key processes—assimilation, deconstruction, and unitization—that collectively explain and resolve an inherent tension related to schema emergence: how to make the unfamiliar familiar but conceptually distinct. We also find that each process relates to analogical transfer, but in a more pluralistic and dynamic way than the existing literature describes. Broadly, these findings have important implications for organizational change and managerial cognition.
ABSTRACT This study documents that M&A delistings are associated with a deterioration in the quality of analysts’ information environment for industry peer firms, measured by an increase in analysts’ ...absolute forecast errors and dispersion. This effect persists for six quarters and is larger when the delisting target firm contributes relatively more to the industry information environment. Further, we find that, among analysts forecasting earnings for an industry peer firm, those who also followed the delisted target firm in the pre-M&A period experience a larger increase in their absolute forecast errors. A comparison based on public versus private target firms also suggests that the loss of target firms’ public disclosures plays a role in the deterioration in the quality of analysts’ information environment. In additional analyses, we find evidence consistent with this effect resulting from a deterioration in analysts’ ability to exploit across-firm information complementarities. JEL Classifications: G14; G18; G34; M40.
How did the Norwich Union, a life and general insurance company, come to see itself as a 'local developer with people always at the centre of our planning'? This article explores how a small number ...of insurance companies, capitalising on their long history of property investment, used their investment funds, or 'life funds', to transform the built environment of UK in the twentieth century. In the postwar period life funds were contracted by local governments to finance, plan and develop solutions to urban issues that paralleled those targeted by post-war welfare reforms. This involved companies in developing expertise, working practices, instruments and collaborative arrangements that are not adequately represented as financial investment. Ventures into development on this scale had also to be ventures in futures planning, calculated bets on how people would - and how they should - live, work and spend. These are enterprises that I characterise as 'experimental practices of financial sociology' as a provocation that acknowledges first, that non-sociologists sometimes devise huge sociological experiments and second, that the separation of economics from sociology, and of finance from society, is a disciplinary move that is far less strictly enacted outside the academy.
PDF
