Measuring overconfidence: Methodological problems and statistical artifacts

Psychological studies are frequently cited in the business and finance literature to bolster claims that various kinds of economic disasters, from the large proportion of start-ups that quickly go out of business to the exaggerated confidence of financial investors, can be attributed to overconfidence. This article reviews some of the problems associated with concluding that people overestimate the accuracy of their judgments based on observed overconfidence measured as the difference between mean subjective probability and proportion correct. Methodological and statistical artifacts, such as regression, can explain many of the observed instances of apparent overconfidence.     

Approaches to Ethics for Corporate Crisis Management

The ethics of corporate crisis management is a seriously underdeveloped field. Among recent proposals in the area, two contributions stand out: Seeger and Ulmer’s (2001) virtue ethics approach to crisis management ethics and Simola’s (2003) ethics of care. In the first part of the paper, I argue that both contributions are problematic: Seeger and Ulmer focus on top management and propose virtues that lack substance and are in need of further development. Simola’s proposal is also fraught with difficulty, since it seems to conceive of ethics of care as a course of action that can be chosen in a crisis, something which runs contrary to the idea of caring. In the second part of the paper, I argue that Simola and Seeger and Ulmer are nevertheless on the right track, and I propose some directions for further development of the ethics of corporate crisis management. I argue that the value of codes of conduct is limited. Furthermore, I propose a way of identifying relevant virtues for corporate crisis management and discuss a problem that is prevalent in crisis management ethics (the temptation of ad hoc utilitarianism).     

When do firms invest in offensive and/or defensive marketing?

Market conditions may lead firms to increase offensive marketing activities aimed at attracting new customers, and/or to enhance defensive relationship building intended to retain current customers. Characteristics of the marketing environment are examined, including firms' interest in technology adoption and perceived need to apply it to provide structure for the supply chain, product development, quality control, and social impact. Such indicators relate to the firm's perception of “competitive intensity” in the marketplace. Survey results from 196 manufacturing companies show that technology adoption propensity and competitive intensity are associated with greater investments in offensive marketing activities as well as customer and employee engagement.     

Budgetary Procedures and Deficits in Norwegian Local Governments

This paper provides an empirical analysis of the connection between budgetary procedures and deficits in Norwegian local governments. We argue that centralized budgetary procedures have an advantage in overcoming common-pool resource problems in the decision-making process and will lead to lower deficits. This hypothesis is tested on a panel data set of Norwegian local governments. The results add to the existing evidence of a negative connection between deficits and the degree of centralization of the budget process. Special emphasis is put on the problem with potential biased estimates resulting from endogeneity of the budgetary variables.     

Local Pollution in Federal Systems

It is widely accepted that decentralized control of local pollution is inefficient if the central and the local authorities are imperfectly informed. This paper shows how the central authority can introduce a flexible grant-in-aid system that induces the local authority to use a weighted combination of local and central information when the local authority suffers from confirmatory bias. If the central authority is highly uncertain about the environmental effects of a specific pollutant, the tax/subsidy scheme can be designed to allow local information to play an essential role in the environmental policy. If the central authority is certain that a pollutant must not exceed a specific limit, the tax/subsidy scheme can be designed to allow local information little influence on the environmental policy.     

Regulating a Polluting Firm Under Asymmetric Information

This paper reinterprets the Laffont-Tirole model of regulation under asymmetric information to cover the case of pollution control. The asymmetry of information concerns the firm's cost of lowering its pollution. The regulator has three objectives: Ensuring an efficient abatement level, generating 'green taxes' and securing the survival of the firm. We show that when optimal abatement is important relative to tax generation, the regulator cannot use the policy of offering the firm a set of linear tax schemes from which to choose. By contrast, this policy is optimal in the Laffont-Tirole model under certain not very restrictive assumptions. We proceed to establish a simple rule for when to shut-down inefficient types. In an example with specific functional forms, we derive the optimal tax function both analytically and graphically. We show the effect on the optimal tax system of a change in a technological parameter.     

Financial Contracting Theory Meets the Real World: An Empirical Analysis of Venture Capital Contracts

We compare the characteristics of real-world financial contracts to their counterparts in financial contracting theory. We do so by studying the actual contracts between venture capitalists (VCs) and entrepreneurs. The distinguishing characteristic of VC financings is that they allow VCs to separately allocate cash flow rights, board rights, voting rights, liquidation rights, and other control rights. We describe and measure these rights. We then interpret our results in relation to existing financial contracting theories. We also describe the interrelation and the evolution across financing rounds of the different rights.     

Contents Volume 15 2000

Volume Contents

Contents Volume 15 2000     

Unternehmenskultur und Unternehmenserfolg: Stand der empirischen Forschung und Konsequenzen für die Entwicklung eines Messkonzeptes

Im Rahmen einer übergreifenden Analyse empirischer Arbeiten wird der State-of-the-Art der Forschung zum Zusammenhang von Unternehmenskultur und Unternehmenserfolg dargelegt. Neben der inhaltlichen Analyse des Zusammenhangs liegt der Schwerpunkt des nachfolgenden Beitrags auf einem Review der Messung von Unternehmenskultur und Unternehmenserfolg, wie sie sich in den betrachteten Zusammenhangsanalysen zeigt. Aufbauend hierauf werden die Grundzüge je eines Konzeptes zur Messung der Unternehmenskultur und des Unternehmenserfolges entwickelt, welche als Ausgangsbasis verstanden werden k?nnen, um in weiterführenden Untersuchungen den Zusammenhang von Unternehmenskultur und Unternehmenserfolg für die unterschiedlichsten Unternehmen zu bestimmen.     

LRN 2016 SPECIAL – high capacity vehicles and modal shift from rail to road: combining macro and micro analyses

ABSTRACT

This paper addresses a road transport policy of allowing high capacity vehicles (HCVs) on the roads. The purpose is to examine the effect reduced road transport costs from HCVs can have on a modal shift. Two studies of HCV implementation in Sweden were combined. A micro-based case study modelled the distribution network of a major retailer in scenarios based on actual cost and flow data. A macro analysis was conducted of the cross-elasticity between rail and road combined with detailed price changes for lorries considering the product characteristics in different industries. The results show the long-term effects of HCVs on the modal shift for heavier, and heavier and longer vehicles. The combined approach triangulates the results and highlights the effects of logistics decision-making, transport network characteristics, and time. It emphasises linkages between modal shift and road transport efficiency, price reductions, geographical characteristics, product types, train organisation, and the capacity of HCVs.