CEO Overconfidence and Corporate Investment

We argue that managerial overconfidence can account for corporate investment distortions. Overconfident managers overestimate the returns to their investment projects and view external funds as unduly costly. Thus, they overinvest when they have abundant internal funds, but curtail investment when they require external financing. We test the overconfidence hypothesis, using panel data on personal portfolio and corporate investment decisions of Forbes 500 CEOs. We classify CEOs as overconfident if they persistently fail to reduce their personal exposure to company‐specific risk. We find that investment of overconfident CEOs is significantly more responsive to cash flow, particularly in equity‐dependent firms.     

Blonde and blue‐eyed? Globalizing beauty,c.1945–c.19801

This article examines the globalization of the beauty industry between 1945 and 1980. This industry grew quickly. Firms employed marketing and marketing strategies to diffuse products and brands internationally, despite business, economic, and cultural obstacles to globalization. The process was difficult and complex. The globalization of toiletries proceeded faster than cosmetics, skin care, and hair care. By 1980, strong differences remained among consumer markets. Although American influence was strong, it was already evident that globalization had not resulted in the creation of a stereotyped American blonde and blue‐eyed female beauty ideal as the world standard, although it had significantly narrowed the range of variation in beauty and hygiene ideals.     

The UK Balance Sheet

With net overseas assets of well over $100bn the UK is now the world's second largest creditor nation after Japan. This has come about because the UK current account benefited from large-scale oil revenues from 1980 onwards, which produced a series of current surpluses. Fortunately the funds were invested overseas at a time of significant recovery in world equity markets. As a result of the increase in its external assets, the UK now receives £5bn p.a. or more from interest, profit and dividend earnings on these assets - a valuable cushion to the run-down in oil revenues.     

Ideas, Civil Servants and Keynes

Sir John Hoskyns has joined Anthony Wedgwood Benn in condemning Civil Service obstruction to the implementation of government policy. William Kingston examines the changes in the Civil Service that have made bureaucratic stubbornness all too predictable.