In recent years, financial economists have begun to examine the influence of managerial traits on the value and operations of the firm.
a. Compare and contrast the results in Bertrand and Schoar (2003) and Fee, Hadlock, and Pearce (2013). How are the findings similar? How do they differ?
b. Distinguish between the “idiosyncratic style” hypothesis and the “selected style” in Fee et al. How do they distinguish between these two hypotheses? Which hypothesis does their evidence support?
c. A series of papers by Malmendier and Tate suggest that overconfident CEOs overinvest and undertake value-destroying acquisitions. Given these negative outcomes, one wonders why firms fail to put proper safeguards in place to limit the actions of overconfident CEOs. Recent work by Hirshleifer, Low, and Teoh (2012) provides a possible rationale.
i. How do Hirshleifer et al. measure overconfidence in CEOs?
ii. What are their basic empirical findings?
iii. How do these empirical findings provide a rationale for why firms may not seek to limit the actions of overconfident CEOs?
|Due By (Pacific Time)
||01/29/2015 09:00 am