With differing views on future developments,companies, especially largeinternationalcompanies, are positioning themselves to take advantage of emerging environmental trends. Among Japanese companies visited, the panel observed an acute interest in using the environmental advantages of their products and processes to enhance their com-petitive position in the market.
When you finish this chapter, you should: Identify major personality dimensions and understand how personality influences leadership and relationships within organizations; clarify your instrumental and end values, and recognize how values guide thoughts and behavior; define attitudes and explain their relationship to leader behavior;...
From the perspective of behavioral economics, rationality is bounded by asymmetrical preferences. Consider, for example, status quo bias. Samuelson and Zeckhauser (1988) reported that when Harvard University changed some of the health insurance options it offered employees, newly hired personnel were more likely to enroll than were people already on the university’s payroll; those employees generally chose to keep their current plans. The appeal of the status quo can be explained, in part, by the concept of loss aversion.
There have been some attempts to explain theoretically the behavior of the stock return volatility.
Veronesi (1999) constructs a model with regime shifts in the endowments in which investors will-
ingness to hedge against their own uncertainty on the true regime generates overreaction to good
news in bad times and volatility clustering. In contrast to that paper, I assume that the exogenous
state variables are not subject to regimes, neither do they exhibit mean-reversion.
This paper contributes to the literature in several ways. Our study is the first to document
that firms are more likely to split their stocks before acquisition announcements and the first
to attempt to explain why they might do so. This paper also contributes to the literature on
managerial opportunistic behaviors. Prior studies identify possible manipulation tools such as
earnings management (Erickson and Wang, 1999; Louis, 2004) and share repurchase (Chan,
Ikenberry, Lee, and Wang, 2005).
After recent accounting scandals in once high-flying firms like Enron and WorldCom, man-
agement behavior has been under close scrutiny by regulators, financial media, and researchers.
Jensen (2005) argues that the dramatic increase in corporate scandals around the turn of the cen-
tury can be explained by agency costs of overvalued equity: when a firm’s equity is substantially
overvalued, managers are forced to take value-destroying actions (some perhaps fraudulent) to
satisfy the market’s unrealistic growth expectations.