Self‐Insurance and Self‐Protection as Public Goods

Many public goods provide utility by insuring against hazardous events. Those public goods can have self‐insurance and self‐protection character. For both situations we analyze the efficient public provision level and the provision level resulting from Nash behavior in a private provision game. We consider the interaction of public goods as insurance devices with market insurance. The availability of market insurance reduces the provision level of the public good for both public and private provision, regardless of whether we consider self‐insurance or self‐protection. Moreover, we show that Nash behavior has always a larger impact than the availability of market insurance.     

Acquisitions,Overconfident Managers and Self‐attribution Bias

We examine whether acquisitions by overconfident managers generate superior abnormal returns and whether managerial overconfidence stems from self‐attribution. Self‐attribution bias suggests that overconfidence plays a greater role in higher order acquisition deals predicting lower wealth effects for higher order acquisition deals. Using two alternative measures of overconfidence (1) high order acquisition deals and (2) insider dealings we find evidence supporting the view that average stock returns are related to managerial overconfidence. Overconfident bidders realise lower announcement returns than rational bidders and exhibit poor long‐term performance. Second, we find that managerial overconfidence stems from self‐attribution bias. Specifically, we find that high‐order acquisitions (five or more deals within a three‐year period) are associated with lower wealth effects than low‐order acquisitions (first deals). That is, managers tend to credit the initial success to their own ability and therefore become overconfident and engage in more deals. In our analysis we control for endogeneity of the decision to engage in high‐order acquisitions and find evidence that does not support the self‐selection of excessive acquisitive firms. Our analysis is robust to the influence of merger waves, industry shocks, and macroeconomic conditions.     

Self‐Fulfilling Liquidity Dry‐Ups

I analyze a model in which holding cash imposes a negative externality: it worsens future adverse selection in markets for long‐term assets, which impairs their role for liquidity provision. Adverse selection worsens when potential sellers of long‐term assets hold more cash because then fewer sales reflect cash needs, and proportionally more sales reflect private information. Moreover, future market illiquidity makes current cash holding more appealing. This feedback effect may result in hoarding behavior and a market breakdown, which I interpret as a self‐fulfilling liquidity dry‐up. This mechanism suggests that imposing liquidity requirements on financial institutions may backfire.     

Self‐Expropriation versus Self‐Interest in Dual‐Class Voting: The Pirelli Case Study

Called to vote for a reduction in their dividend privileges, Pirelli's nonvoting shareholders appeared to expropriate themselves and favor the voting class of shares. However, what initially seemed to be self‐expropriation became self‐interest when the media coverage, voting decisions, and dual‐class ownership of 36,361 shareholders were investigated. Most of the institutional investors voting “for” the proposal were found to have ownership ties with controlling shareholders or to have held voting shares. Moreover, dual‐class ownership significantly increased the likelihood of shareholders voting to expropriate one class of shares if they benefited from the other class in their portfolios.     

Financial Markets,the Real Economy,and Self‐Fulfilling Uncertainties

We develop a model of informational interdependence between financial markets and the real economy, linking economic uncertainty to information production and aggregate economic activities in general equilibrium. The mutual learning between financial markets and the real economy creates a strategic complementarity in their information production, leading to self‐fulfilling surges in economic uncertainties. In a dynamic setting, our model characterizes self‐fulfilling uncertainty traps with two steady‐state equilibria and a two‐stage economic crisis in transitional dynamics.     

Self‐Serving Attribution Bias,Overconfidence, and the Issuance of Management Forecasts

Prior studies document that managers consider a variety of costs and benefits when deciding whether to issue earnings forecasts. Using an abstract experiment and a survey of experienced financial managers, we provide evidence that managerial overconfidence may also contribute to this decision. Our experiment shows that participants engage in self‐serving attribution, giving greater weight to internal than external factors as explanations for good performance. This increases confidence in improved future performance, which increases their willingness to issue forecasts. Two facets of the stable individual trait overconfidence, dispositional optimism and miscalibration, also contribute to confidence in improved future performance and willingness to issue forecasts. Consistent with these results, experienced financial manager survey participants believe other managers are likely to overestimate the extent to which they contribute to positive firm performance, and both overoptimism about firm performance and overconfidence in their ability to predict future firm performance contribute to issuance of earnings forecasts.     

Temptation and Self‐Control: Some Evidence and Applications

This paper studies the empirical relevance of temptation and self‐control using household‐level data from the Consumer Expenditure Survey. We construct an infinite‐horizon consumption‐savings model that allows, but does not require, temptation and self‐control in preferences. In the presence of temptation, a wealth–consumption ratio, in addition to consumption growth, becomes a determinant of the asset‐pricing kernel, and the importance of this additional pricing factor depends on the strength of temptation. To identify the presence of temptation, we exploit an implication of the theory that a more tempted individual should be more likely to hold commitment assets such as individual retirement account (IRA) or 401(k) accounts. Our estimation provides empirical support for temptation preferences. Based on our estimates, we explore some quantitative implications of this class of preferences for capital accumulation in a neoclassical growth model and the welfare cost of the business cycle.     

Accounting and Finance Graduate Employment Outcomes: Underemployment,Self‐employment and Managing Diversity

The employment landscape for new graduates is increasingly challenging due to rapid changes in automation and globalisation, coupled with softening labour markets arising from economic uncertainty. For accounting and finance, there is the added complexity of a shift away from traditional core responsibilities and evidence of marginalisation among certain groups within the professions. The study used national data (N = 40 141) to examine the employment outcomes of accounting and finance graduates in Australia. Findings indicate weak full‐time, short‐term employment outcomes among graduates with little variation in recent years. High levels of casual working were evidenced and the proportion of self‐employed was relatively low in comparison with the broader workforce and was dominated by male and older graduates. Of those working, 45% were not in graduate‐level employment. There were variations in patterns of employment and underemployment by individual characteristics. The study informs stakeholders of prevalent employment trends and determinants of postgraduation outcomes in accounting and finance graduates, in addition to insights into how these professions are progressing in managing diversity. Implications for stakeholders in relation to improving graduate employment outcomes, as well managing diversity, are discussed.     

Accounting Students’ Planning,Writing, and Performance on a Time‐Constrained Case Analysis: Effects of Self‐Talk and Prior Achievement

When writing a case analysis, most students first allocate time to plan the content and structure of their response, and then proceed to write with differing degrees of urgency, the outcomes of which are case responses of differing quality. This study examines the extent to which planning time influences writing urgency and, ultimately, the quality of case responses in a time‐constrained setting. It also investigates whether these behaviors and outcomes depend on students’ frame of mind, by experimentally inducing differing types of pre‐examination self‐talk. Analyses show that planning time was negatively associated with writing urgency; students who spent more time planning subsequently wrote with less urgency. Writing urgency was positively associated with case response quality and, after controlling for differences in writing urgency, planning time was positively associated with response quality. Results indicate that different planning and writing behaviors can be induced by different forms of self‐talk prior to the writing task. Relative to interrogative self‐talk (“Will I …?”), exclamatory self‐talk (“I will …!”) caused higher‐achieving students to spend more time planning, but then write with less urgency and subsequently produce lower‐quality case responses. Conversely, after engaging in exclamatory rather than interrogative self‐talk, lower‐achieving students spent less time planning but then wrote with greater urgency and produced higher‐quality responses. These results indicate that (i) planning significantly affects writing and performance, (ii) students can influence their own planning behavior through pre‐task self‐talk, but (iii) pre‐task self‐talk can be beneficial or detrimental depending on students’ prior achievement.     

Self‐Funding of Health‐Care Plans by Small Firms: Risks and Reforms

Small employers that offer health insurance have usually offered fully insured products through traditional health plans. Recently, the Patient Protection and Affordable Care Act (ACA) has created new requirements for fully insured products that will entice more small firms to fund their own health‐care benefits. However, self‐funding poses significant risks to these small firms, their employees, and state exchanges. To mitigate some of these risks within current political realities, we recommend advance disclosures—to small firms of material changes in their stop‐loss policies, and to their employees that premium subsidies are available only on ACA exchanges. We also suggest strengthening Small Business Health Options Program exchanges by broadening the availability of subsidies and building partnerships with brokers. Finally, we recommend an expanded role for brokers and third‐party administrators in helping small firms improve their choice of health‐care insurance.     

Self‐Selection and the Forecasting Abilities of Female Equity Analysts

This paper investigates whether there are systematic differences between the forecasting style and abilities of female and male analysts, and whether market participants recognize these differences. My key conjecture is that only female analysts with superior forecasting abilities enter the profession due to a perception of discrimination in the analyst labor market. Consistent with this conjecture, I find that female analysts issue bolder and more accurate forecasts and their accuracy is higher in market segments in which their concentration is lower. Further, the stock market participants are aware of the male–female skill differences. They respond more strongly to the forecast revisions by female analysts even though those analysts get less media coverage. The short‐term market reaction is incomplete, however, because it is followed by a strong post‐revision drift. The perception of abilities is similar in the analyst labor market, where female analysts are more likely to move up to high‐status brokerage firms, while their downward career mobility is lower. Collectively, these results indicate that female analysts have better‐than‐average skill due to self‐selection and market participants are at least partially able to recognize their superior abilities.     

The Distribution of Wealth of Older Self‐Employed Britons

Little is known about the wealth of older self‐employed people, despite growing interest in this labour market group. This paper utilises the British Retirement Survey to fill the gap by providing novel estimates of their lifetime wealth. The findings dispel the idea that the self‐employed live in poverty; indeed, they seem to be a relatively wealthy group, holding a broad spread of assets and subject to moderate lifetime wealth inequality. These findings may help inform modelling of retirement behaviour of this group, as well as pension policy design.     

When Preferences for a Stable Interest Rate Become Self‐Defeating

Monetary policymakers often seem to have preferences for a stable interest rate, in addition to stable inflation and output. In this paper, we investigate the implications of having an interest rate level term in the loss function when the policymaker lacks commitment technology. We show that such preferences may become self‐defeating, in the sense that they generate a less stable interest rate than in the case without preferences for interest rate stability.