Managerial Overconfidence,Self-Attribution Bias,and Downwardly Sticky Investment: Evidence from Korea

The extant literature on behavioral corporate finance has explored the effects of overconfidence on investment–cash flow sensitivity (ICS) to explain overinvestment, yet it has overlooked the asymmetric behavior of investments in relation to changes in cash flow levels. This study examines whether investments behave asymmetrically responding to changes in cash flows and, if so, how managerial overconfidence affects asymmetric ICS. Using a sample of KOSPI and KOSDAQ firms in Korea, we find the incidence of downwardly sticky ICS in unconstrained firms. We then find that overconfident managers encourage ICS to be stickier than their rational peers do in unconstrained firms. Finally, we find that managerial overconfidence intensified by self-attribution bias induces ICS to get even stickier, suggesting more explicit evidence of corporate investment distortions. The results of alternative tests using the asymmetric models of Homburg and Nasev (2008) are qualitatively consistent with prior results. Overall, our findings imply a higher incidence of excessive investment commitments driven by overconfident managers.     

Do the magnitude and asymmetry of specific asset investments matter in the supplier–buyer relationship?

Abstract

Despite a body of literature on specific asset investments, the extant literature falls short of exploring the magnitude and symmetry of specific asset investments in supplier–buyer relationships. This paper builds on prior research to identify and examine the impact of total and asymmetric specific asset investments on commitment, trust, and conflict in supplier–buyer relationships. Covariance structure analysis is used to analyse survey data. The results show that total SAI are positively related to commitment and trust, while asymmetric SAI are negatively related to trust and positively related to conflict in supplier–buyer relationships. Decision-making uncertainty affects trust, commitment, and conflict more than any other variables. Therefore, firms should work to strengthen their relationships by increasing the magnitude of specific asset investments with the aim of increasing trust and commitment. We also discuss the limitations of this study and suggestions for future research.     

Emotions and dissonance in ‘ethical’ consumption choices

Abstract

This paper investigates the role of emotions and the prevalence of dissonant/incongruent choice behaviour within the context of ethical consumption. Based on 31 in-depth interviews with British consumers, the findings demonstrate that consumers consciously indulge in ‘ethical’ and ‘unethical’ behaviour (as defined by respondents themselves), often within short time frames, and that they often compensate for unethical choices by making ethical choices later on (and vice versa). The study provides evidence that positive and negative emotions are a key driver of this dissonant behaviour. Guilt is the most salient emotion, and a taxonomy of guilt in this context is derived from the data. Consumers are found to employ guilt-management strategies in order to sustain contradictory behaviour and manage cognitive dissonance. A conceptual framework is derived in order to summarise the observed role of emotions in ethical consumer choice. The paper also provides additional explanations of the manifestation of the attitude–behaviour gap.     

International Housing Markets and the U.S. Subprime Crisis

We propose a novel decomposition approach to study the degree of co-movement of international housing markets while distinguishing among different economic drivers. We find that the housing market variability for an average country was mainly driven by the common housing risk premium components during the years leading up to the 2007–08 subprime financial crisis. A decrease in the common housing risk premium was followed by a housing boom and economic expansion in the United States prior to the crisis. Our findings add to the understanding of the role of common risk factors across international housing markets before the crisis.     

Investor sentiment and the risk–return relation: A two-in-one approach

Traditional finance theory posits a positive risk–return relation, but empirical evidence is inconclusive. Retail investor sentiment has long been viewed as a distorting factor, while more recently institutional investor sentiment is thought to play a role. We examine the separate and joint impacts of retail and institutional investor sentiments on the risk-return relation. We find, at both market and firm levels, the risk-return relation is more likely to be distorted by the two investor-type sentiments jointly, rather than separately. We further find a cross-sectional pattern, with the risk-return relation being more sensitive to investor sentiment for stocks with specific characteristics.     

I,me, and my everything: Self conceptual traits and compulsive buying behavior

Compulsive buying behavior is detrimental to the well-being of the consumers, brands, and the economy. Therefore, the current study aims to understand how the self-conceptual traits and values underline the corridors to the compulsive buying behavior of fashion apparel products. We collected self-administered data from systematically selected 744 young shopping mall consumers and employed structural equation modeling (SEM) via maximum likelihood method for analysis. Self-conceptual traits (physical and achievement vanity), materialism, and brand consciousness play a pivotal role in the development of compulsive buying behavior in young consumers of Pakistan. Furthermore, the presence of materialistic attitude and brand consciousness in consumers firmly explains vanity-driven consumer's excessive, chronic, and unneeded purchasing of fashion appeal products. Policymakers and fashion apparel marketers should limit the excessive use of self-oriented and self-defining appeals in their marketing campaigns and focus on strategies that build consumer relationships with brands based on mutual benefits and welfare.     

Integrating decomposition approaches for the analysis of temporal changes in economic structure: an application to Chicago's economy from 1980 to 2000

This paper presents an attempt to integrate two flow decomposition methods to analyse temporal changes in a region's economic structure. The two methods of structural analysis are push–pull decomposition analysis and structural Q-analysis. Push–pull analysis presents a quasi-optimization decomposition of a set of matrices with actual intersectoral economic flows into a weighted set of matrices, while structural Q-analysis provides a form in which the structure of these decomposed flows can be considered. The paper provides an expository application to Chicago's economic structure over the period of 1980 to 2000, to reveal a complementary perspective of hollowing-out the production process in the Chicago economy that was identified in previous studies.     

A Disaggregated Econometric Model Based on Flexible Functional Forms

This paper introduces an econometric input—output model for Western Germany in a disaggregation of 12 commodities and sectors. The ‘Jorgenson’-type equilibrium model is based on flexible functional forms on the supply and on the demand side of the commodity markets. For intermediate demand, the relationship between the translog function and its special cases—the Cobb-Douglas function— is exploited. Prices and production are endogenized by market-clearing conditions. The fully integrated model also endogenizes capital accumulation, a rudimental govern-ment budget and income distribution, as well as wages and labour demand on rationed labour markets. The results of a dynamic ex post simulation show that the model is able to depict the sectoral economic development in Germany in the sample period from 1970 to 1986.     

An input–output virtual laboratory in practice – survey of uptake,usage and applications of the first operational IELab

ABSTRACT

The Industrial Ecology Virtual Laboratory (IELab) is a collaborative cloud-computing platform for compiling large-scale, high-resolution, enviro-socio-economic accounts based on multi-region input–output tables and for conducting integrated sustainability assessment projects. These include, for example, assessments of biofuels and low-carbon construction materials or high-resolution waste modelling. This contribution provides a structured review of IELab applications that were published in either peer-reviewed journal papers or in the form of conference proceedings. The main research question posed is ‘What are the specific features of IELab that were used in the research and could the research have happened without them?’ It is investigated whether the IELab has actually and truly enabled new research. A detailed analysis of IELab characteristics and their usage is presented. The results can help with the design of new research projects and inform existing and prospective users of the IELab about the options for academic research and practical applications.     

ANALYSING THE STRUCTURE OF THE ECONOMY USING PHYSICAL INPUT–OUTPUT TABLES

Analyses using physical input–output tables (PIOTs) are key to understanding the physical metabolism of economies, since they relate production to the generation of emissions and use of resources. Two methods have been developed to calculate the primary resources and emissions associated with a given final demand. However, one of these alters the PIOT, revealing different technical coefficients and Leontief inverse matrices. Which method should be used for structural analysis? In this paper, I compare both methods, explain the structural differences between them and illustrate the latter through a backward linkage analysis. I find that only one method is suited to the analysis of the physical structure of the economy, since it comprehends both the production of goods and associated emissions. The method is identified as a new model capable of tracing by-products as final outputs. Finally, I generalise both methods to analyse PIOTs including several emission types.