Are we overconfident in executive overconfidence research? An examination of the convergent and content validity of extant unobtrusive measures

Building understanding of overconfident executives is central to a growing literature that spans a number of disciplines. Much of this research has utilized unobtrusive, or indirect, measures to assess executive overconfidence from secondary data sources. We analyze the convergent and content validity of seven extant unobtrusive measures of executive overconfidence. The results of our analyses indicate that these measures do not exhibit adequate convergence, suggesting that existing measures are not measuring the same construct. Further, we administer a sort task to academic colleagues to assess whether scholars believe that the seven measures are adequately assessing the intended construct. The results of our sort task indicate that scholars did not categorize any of the seven measures as sufficient for measuring overconfidence. We conclude with suggestions for future research to address the inadequate convergent and content validity found in our assessment of extant measures of executive overconfidence.     

The effect of more rules‐based guidance on expense disclosure under International Financial Reporting Standards

International Financial Reporting Standards (IFRS) are often described as principles‐based; however, we show that IFRS and Australian pre‐IFRS expense‐related standards are more rules‐based than pre‐IFRS expense disclosure in New Zealand. Thus, we examine expense disclosure in New Zealand and Australia around IFRS adoption to provide evidence on the effect of more or less rules‐based standards on voluntary disclosure. First, we add to the rules versus principles‐based standards debate by finding higher voluntary expense disclosure under more rules‐based standards (e.g. IFRS). This contrasts with expectations, as we would expect fewer voluntary disclosures under more rules‐based standards as there would be fewer possible voluntary disclosures. Second, we document that New Zealand firms have significantly less voluntary expense disclosure than size‐ and industry‐matched Australian firms in both the pre‐ and post‐IFRS period. However, all measures of expense disclosure significantly improved post‐IFRS for New Zealand, whilst little change occurred for Australian firms. Thus, there is greater financial statement comparability across these countries post‐IFRS, but not full harmonization. Third, we show that the relationship between most firm characteristics and expense disclosure is weaker post‐IFRS. In addition, cross‐listed firms and loss‐making firms have a higher level of expense disclosure, as contrasted with firms in the investment and property industry which have a lower percentage of unspecified expenses but also report fewer voluntary expenses.     

Framing and the disposition effect: evidence from mutual fund investor redemption behaviour

Research on decision-making under uncertainty has highlighted that individuals often use simple heuristics and/or exhibit behavioural biases. Specifically, with respect to portfolio decisions, research has indicated that investors are subject to the disposition effect, i.e. they are reluctant to sell assets that have performed poorly (losers) and prone to sell assets that have performed well (winners). We find that the mutual fund investors in our sample are subject to the disposition effect when they withdraw the redemption proceeds from their account, but not when they reallocate the proceeds within the account. The evidence is consistent with Shefrin and Statman’s hypothesis that framing a transaction as a transfer as opposed to a sale mitigates the disposition effect.     

Aquaculture imports from Asia: an analysis of U.S. consumer demand for select food quality attributes

The increasing share of imported food in the United States, coupled with highly publicized incidents of food contamination and adulteration in Asia, particularly China, is posing new challenges for consumers and food safety regulators. In this study, we focus on imported shrimp and tilapia, to evaluate consumer willingness‐to‐pay (WTP) for enhanced food safety, use of antibiotics, and eco‐friendly environmental practices. Results show that U.S. consumers were willing‐to‐pay more for enhanced food safety, followed by the use of no antibiotics and environmental friendly production practices. American consumers in our sample were found to have a higher WTP for domestic products and placed more trust on U.S. government verification of product attributes followed by third‐party certification.     

Economic impacts of climate change on the Australian dairy sector

We analyse the economic implications of climate‐driven pressures on the pasture‐based dairy sector in Australia. We use an integrated assessment model that includes a climate scenario generator, a climate‐biophysical response framework and an economywide analytical framework. For the climate scenario generator, we use data from the OzClim database of the Commonwealth Scientific and Industrial Research Organisation. For the climate‐biophysical response framework, we use the DairyMod model with inputs of changes in climate variables from OzClim to quantify climate change effects on pasture growth and productivity. For the economywide analytical framework, we use the National Integrated Assessment Model to quantify the economic implications of these effects on the dairy sector. The simulated pattern of regional changes in dairy output is not a simple function of the changes in dairy productivity. Our results show that the relative size of productivity changes across regions affects the relative competitive advantage of dairy‐producing regions. Several factors affect the regional distribution of simulated dairy‐output changes, including substitution among sources of dairy output and competition for inputs like supplementary feed. An increased output in regions with moderate reductions in dairy productivity may occur because the severely climate‐affected regions absorb the greatest loss in output.     

When do incentives work in channels of distribution?

The incentive dilemma refers to a situation in which incentives are offered but do not work as intended. The authors suggest that, in an interorganizational context, whether a principal-provided incentive works is a function of how it is evaluated by an agent: for its contribution to the agent’s bottom line (instrumental evaluation) and for the extent it is strategically aligned with the agent’s direction (congruence evaluation). To further understand when incentives work, the influence of two key contextual variables—industry volatility and dependence—are examined. A field study featuring 57 semi-structured depth interviews and 386 responses from twin surveys in the information technology and brewing industries provide data for hypothesis testing. When and whether incentives work is demonstrated by certain conditions under which the agent’s evaluation of an incentive has positive or negative effects on its compliance and active representation. Further, some outcomes are reversed in the high volatility condition.     

Entrepreneurial firms’ network competence,technological capability,and new product development performance

Successfully developing new products is critical to an entrepreneurial firm’s continued success. Based on the resource management model, this study aims to answer the key research question: how entrepreneurial firms leverage network competence and technological capability to enhance their new product development (NPD) performance in a turbulent environment. Using data collected from 134 entrepreneurial firms in China, we investigate the performance effects of network competence and technological capability, and the moderating effects of technological turbulence and market turbulence. Our findings show that network competence has a positive impact on NPD performance and technological capability plays a mediating role between network competence and NPD performance. Technological turbulence enhances the performance effects of network competence and technological capability; market turbulence advances the performance effect of network competence, but fails to exert significant negative impact on that of technological capability. We discuss managerial implications of our findings and offer directions for future research.     

Buyer Alliances as Countervailing Power in WIC Infant-Formula Auctions

State agencies in infant-formula procurement auctions receive lower bids when they are in buyer alliances than when they are unallied. The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) uses an auction to procure infant formula. Manufacturers bid on the right to be an agency’s sole supplier by offering a rebate on formula sold through WIC. Agencies frequently join together in buyer alliances. An empirical estimation shows that bids are lower to alliances and that lower prices result because alliances are heterogeneous. Results suggest that when heterogeneity is not controlled, bids decline with alliance size, which has policy implications because Congress recently limited alliance size.