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.     

Corporate cash holdings and political connections

We examine the relation between corporate liquidity and political connections measured via lobbying expenditures. This is an interesting question as many of the motives for holding cash should be diminished by political connections. Results indicate a significant and inverse relation between cash levels and lobby expenses and that the marginal value of cash decreases with lobbying. Taken together, these findings suggest firms react optimally to the reduced benefits of cash linked to political connections and that the market recognizes the weakened benefits of cash. Overall, our research shows another way political connections can shape corporate policy.     

The market research contribution to new product failure and success

This paper examines the use made by management of market research data in the evaluation of new product development (NPD) projects. Stressing the need for a systematic approach to NPD the paper sets out four brief case histories, the products being Crocodillo, Paul Masson wine, the Prudential's Holburn UK Unit Trusts, and Golden Wonder's Preludes. These case histories illustrate both the value of a systematic approach to NPD by building up a market research programme and also the limitations of market research data which cannot alone be any guarantee of success.     

MODELING UNCERTAIN FORECAST ACCURACY IN SUPPLY CHAINS WITH POSTPONEMENT

We examine a situation where a manufacturer operates in a two‐mode production environment. The first mode could involve overseas vendors and manufacturing facilities. If additional units are later required, the company must use its second mode—more expensive last‐minute domestic vendors and manufacturing sites. We develop a new methodology for analyzing the impact of forecast accuracy on the decision to postpone production. We examine the interaction of forecast accuracy, shortage vs. holding costs, transportation costs and the cost of postponing production in the supply chain of a single product facing uncertain demand. Our model can be used to analyze the cost of important changes, such as increasing forecast accuracy, reducing the cost of backorders, lowering the cost of delaying production, or lowering transportation costs. Our model allows a firm to understand its overall cost structure so that it can accurately evaluate the impact of improved forecast accuracy and lowered costs in the context of postponement.     

Economics of Engineering: A New Fabric from Some Old Threads

Three axioms are used to present the basic fundamental ideas of engineering economics. These axioms are then used to derive a generalization of present value that includes both a local and global perspective. The relationship between the local and global concepts is derived and then used to solve cash flow problems that involve flows placed arbitrarily in time.     

MEASURING THE DEADWEIGHT COSTS OF DUP AND RENT SEEKING ACTIVITIES

I examine a simple model of rent seeking behavior in order to determine the correct way to measure welfare loss due to rent seeking. I conduct this analysis using a general equilibrium version of the standard partial equilibrium consumers' surplus cost-benefit setup. I conclude that the ordinary tools of cost-benefit analysis, such as consumers' and producers' surplus, are up to the task of measuring the deadweight loss due to rent seeking, as long as they are applied in the proper general equilibrium context.     

Winners and Losers during a Deep Economic Crisis: Firm‐level Evidence from Indonesian Manufacturing*

What happens to firms during periods of deep economic crisis? Depending on the nature of the crisis, the general effects are well known. However, owing to data availability, there are relatively few detailed firm‐level studies. With the aid of an unusually rich database, the present paper investigates the effects of Indonesia's 1997–1998 crisis on manufacturing establishments. Consistent with studies of other crisis episodes, foreign ownership and prior export orientation are found to be highly significant determinants of survival and recovery. The effects of firm size are ambiguous. The industry in which firms are located, in particular its factor proportions, is also found to be significant.