Minggui Yu, Yujing Huang, Huijie Zhong and Qing Zhang
There are two opposite views about whether the Antitrust Law is conducive to the development of the economy. One view is that the Antitrust Law can restrain monopoly, maintain…
Abstract
Purpose
There are two opposite views about whether the Antitrust Law is conducive to the development of the economy. One view is that the Antitrust Law can restrain monopoly, maintain market competition and benefit economic growth. The other view is that the Antitrust Law inhibits innovation by monopolistic firms and fosters rent-seeking, which is bad for economic growth. To provide a possible perspective for clarifying the controversy, this paper aims to answer the following two questions: first, will the Antitrust Law inhibit corporate innovation? Second, does the antitrust enforcement agency discriminate against private enterprises?
Design/methodology/approach
Based on the samples of A-share listed companies from 2003 to 2013, the authors use the implementation of China’s Antitrust Law in 2008 as a policy shock, take the monopoly enterprises in each industry as the treatment group and competitive enterprises as the control group, using the difference-in-differences method to test the impact of the implementation of the Antitrust Law on corporate innovation activities.
Findings
The results show that compared with competitive enterprises, the patent output of monopolistic enterprises was significantly reduced after the implementation of the Antitrust Law, which indicates that the Antitrust Law does inhibit the innovation activities of monopolistic enterprises. Further research finds that the innovation suppression effect of the Antitrust Law is more prominent in state-owned enterprises, which means that the government does not have “selective law enforcement” against private enterprises in the process of law enforcement. Therefore, the results provide evidence for the idea that government intervention is neutral.
Originality/value
First, the paper enriches and expands the research on the factors affecting corporate innovation from the perspective of market structure. Second, it enriches and expands relevant research on the consequences of implementing the Antitrust Law from the perspective of corporate innovation. Third, it not only provides the relevant empirical evidence for clarifying the dispute about the Antitrust Law but also is helpful to clarify whether the Chinese Government has “selective law enforcement” against private enterprises.
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Hongbo Pan, Xinping Xia and Minggui Yu
The purpose of this paper is to model the announcement returns of merging firms based on managerial overconfidence about merger synergy.
Abstract
Purpose
The purpose of this paper is to model the announcement returns of merging firms based on managerial overconfidence about merger synergy.
Design/methodology/approach
The paper applies continuous‐time real options techniques and game theoretic concepts. Managerial overconfidence and strategic interaction between the bidder and the target are incorporated into the model.
Findings
This model implies that: abnormal returns to bidding shareholders will be negative with a high degree of managerial overconfidence; combined returns to shareholders are usually positive; and both the bidder's and the target's abnormal returns are related to industry characteristics, the degree of managerial overconfidence, and the way merger synergies are divided.
Originality/value
This paper, for the first time, reconciles theoretically the following stylized facts: combined returns to shareholders are usually positive; and returns to the acquirer are, on average, not positive. In addition, the model generates new predictions relating these returns to industry characteristics and the degree of managerial overconfidence.
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Dong Wang and Desheng Wu
China has formally implemented equity incentive for more than 10 years; thus, a considerable number of equity incentive programs has entered the exercise period. This means that…
Abstract
Purpose
China has formally implemented equity incentive for more than 10 years; thus, a considerable number of equity incentive programs has entered the exercise period. This means that it is time to conduct a comprehensive analysis of the incentive effects of equity incentive throughout the whole implementation phase. The purpose of this paper is to examine the relationship between equity incentive, enterprise’s risk taking and risk decisions in China.
Design/methodology/approach
Using sensitivity of executives’ wealth and stock price (Delta) to measure the alignment effect and using sensitivity of executives’ wealth and stock return volatility (Vega) to measure the risk-taking effect, this paper aims to empirically test the relation of equity incentive and enterprise’s risk taking and risk decisions.
Findings
The authors find that Vega is positively related to risk taking; however, this improvement was mainly reflected in the private enterprises rather than state-owned enterprises. In terms of corporate policy choice, the authors find that Vega is positively related to firm focus and leverage. But, they have not found that Vega can promote R&D investment.
Originality/value
Existing studies have mostly concerned about the executives’ opportunistic behavior; however, analyses of the positive effect of equity incentive are limited. The authors use a combination of risk-taking incentives and alignment incentives to test the relationship between equity incentive and risk taking.
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Runhui Lin, Fei Li and Adedigba Olawoyin
Overconfidence as an important psychological factor can also affect CEO’s cognitive preferences, while there are few studies about the impact of CEO’ overconfidence on the…
Abstract
Purpose
Overconfidence as an important psychological factor can also affect CEO’s cognitive preferences, while there are few studies about the impact of CEO’ overconfidence on the international expansion of companies. This paper aims to fill this gap and further discuss the moderating role of CEO’s overseas experience, CEO duality and ownership.
Design/methodology/approach
The authors focus on the Chinese context, collect 2008–2016 data from China's manufacturing industry as sample, use fixed effect model to analyse the effect of CEO overconfidence on international expansion strategy of Chinese firms.
Findings
The empirical results show that: CEO overconfidence positively promotes the degree of firm internationalization. CEO foreign experience positively affects the internationalization degree, but can restrain overconfidence thus negatively regulate this impact relationship. When duality is present, both CEO power and managerial discretion are pronounced and they exhibit a stronger effect. Firm’s equity nature will affect the relationship between CEOs' overconfidence and the degree of internationalization. Compared with private enterprises, CEOs in state-owned enterprises have limited power, therefore, this influence relationship is weaker.
Originality/value
This study has emphasized the importance of top executives' psychological characteristics on firm internationalization, which is key application and complement of upper echelons theory and fills the research gap in the literature. In this paper, the authors found the advantages of overconfidence for firms, which helps to understand the complex meaning of overconfidence. The results of moderating effect further explore the application of overconfidence in different context, which has some implications for management practice.
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Rateb Alqatamin, Zakaria Ali Aribi and Thankom Arun
The purpose of this paper is to investigate the effect of CEOs’ characteristics on the level of forward-looking information (FLI) disclosure. In particular, the study examines the…
Abstract
Purpose
The purpose of this paper is to investigate the effect of CEOs’ characteristics on the level of forward-looking information (FLI) disclosure. In particular, the study examines the effect of CEO age, gender and overconfidence on the disclosure of FLI in Jordan firms.
Design/methodology/approach
The study uses a disclosure index to measure the level of FLI disclosure and employs random-effect and panel data regressions to examine the relationship between CEOs’ characteristics and the level of FLI disclosure. The sample consists of 201 non-financial companies listed on the Amman Stock Exchange for the period 2008-2013.
Findings
The results of the study show that the CEO age has a significant negative relationship with the level of FLI disclosure in annual reports of non-financial Jordanian companies, whereas gender and overconfidence have a significant positive association with FLI disclosure.
Research limitations/implications
The single country context limits the generalisability of the findings.
Practical implications
The results of the study could be beneficial for the users of financial information, such as regulators, investors, auditors and lenders. These users might consider the findings of the study when they are using a company’s financial information. Accordingly, they may seek to extend the investigations and verify such reporting practices and consequently make better decisions. In addition, the findings provide empirical evidence that helps managers in assessing their financial transparency and accountability.
Originality/value
The relationship between CEO’s characteristics and the level of FLI disclosure is still ambiguous. This study contributes to the FLI disclosure literature by identifying the role of CEO characteristics on the level of FLI disclosure. Thus, it offers evidence that the level of FLI disclosure is driven by specific CEO characteristics.
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Karim Mansour, Emad Sayed and Khaled Hussainey
The purpose of this study is to (1) investigate how IFRS 16 affects firms’ risk in Egypt and (2) examine the moderating role of managerial overconfidence on this relation.
Abstract
Purpose
The purpose of this study is to (1) investigate how IFRS 16 affects firms’ risk in Egypt and (2) examine the moderating role of managerial overconfidence on this relation.
Design/methodology/approach
This study uses data from the annual reports of 38 Egyptian firms from 2014 to 2022. This study employs the generalized method of moments (GMM) and the three-stage least squares (3SLS) as estimation techniques.
Findings
The results show that IFRS 16 positively affects Egyptian firm risk, while managerial overconfidence reduces this positive effect.
Research limitations/implications
This study has some limitations. First, the sample size was relatively small. Second, our analysis did not incorporate other metrics of managerial overconfidence owing to the unavailability of relevant data in Egypt.
Practical implications
This study assists stakeholders and regulators in realising the implications of IFRS 16 on a firm’s risk, especially in emerging markets. Also, it enables managers to identify and assess lease-related risks more accurately to assist in developing appropriate risk mitigation strategies and optimizing lease-related decision-making processes. Furthermore, it aids in enhancing comprehension and knowledge of the interplay between managerial behaviour and firm outcomes.
Originality/value
Grounded in agency theory, this study reveals novel empirical insights into the impact of IFRS 16 on firm risk, especially in the context of emerging markets. Utilizing behavioural decision theory and upper echelons theory, it examines the previously unexplored influence of managerial overconfidence on this relationship.