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Table of Contents

Understanding Corporate Governance Through Learning Models of Managerial Competence

Benjamin E. Hermalin, University of California, Berkeley
Michael S. Weisbach, Ohio State University (OSU) - Department of Finance, National Bureau of Economic Research (NBER)

What Doesn't Kill You Will Only Make You More Risk-Loving: Early-Life Disasters and CEO Behavior

Gennaro Bernile, Singapore Management University - Lee Kong Chian School of Business
Vineet Bhagwat, University of Oregon
P. Raghavendra Rau, University of Cambridge, UC Berkeley - Haas School of Business

Local Gambling Preferences and Corporate Innovative Success

Yangyang Chen, Monash University - Department of Accounting and Finance, Financial Research Network (FIRN)
Edward J. Podolski, La Trobe University
S. Ghon Rhee, University of Hawaii at Manoa - Shidler College of Business
Madhu Veeraraghavan, T.A. PAI Management Institute, Finance Area

Trust and Controllability in Venture Capital Fundraising

Tobias Kollmann, University of Duisburg-Essen
Andreas Kuckertz, University of Hohenheim
Nils Middelberg, University of Hohenheim - Faculty of Business, Economics and Social Sciences

Influence of CEO Social Status on Acquisitiveness

Yulia Plaksina, Dublin City University Business School
Liam A. Gallagher, Dublin City University Business School
Michael M. Dowling, Dublin City University Business School

CEO Narcissism and the Impact of Interlocks on Corporate Strategy

David H. Zhu, Arizona State University (ASU) - W. P. Carey School of Business
Guoli Chen, INSEAD - Singapore


CORPORATE GOVERNANCE & SOCIOLOGY OR PSYCHOLOGY eJOURNAL
Sponsored by IRRC Institute

"Understanding Corporate Governance Through Learning Models of Managerial Competence" Free Download
Fisher College of Business Working Paper No. 2014-03-04
Charles A. Dice Center Working Paper No. 2014-04

BENJAMIN E. HERMALIN, University of California, Berkeley
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MICHAEL S. WEISBACH, Ohio State University (OSU) - Department of Finance, National Bureau of Economic Research (NBER)
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A manager’s shareholders, board of directors, and potential future employers are continually assessing his ability. A rich literature has documented that this insight has profound implications for corporate governance because assessment generates incentives (good and bad), introduces assorted risks, and affects the various battles that rage among the relevant actors for corporate control. Consequently, assessment (or learning) is a key perspective from which to study, evaluate, and possibly even regulate corporate governance. Moreover, because learning is a behavior notoriously subject to systematic biases, this perspective is a natural avenue through which to introduce behavioral and psychological insights into the study of corporate governance.

"What Doesn't Kill You Will Only Make You More Risk-Loving: Early-Life Disasters and CEO Behavior" Free Download

GENNARO BERNILE, Singapore Management University - Lee Kong Chian School of Business
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VINEET BHAGWAT, University of Oregon
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P. RAGHAVENDRA RAU, University of Cambridge, UC Berkeley - Haas School of Business
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The extant literature on managerial style posits a linear relation between a CEO’s exposure to risk and subsequent corporate policy. We show that there is a non-monotonic relation between CEO’s early-life exposure to natural disasters and risk-taking. Specifically, experiencing natural disasters without extremely negative consequences appears to desensitize CEOs to the negative consequences of risk. However, if a CEO was exposed to "extreme" levels of fatal disasters and experienced the downside potential of risky situations, he or she appears to be more cautious in their approach to risk when at the helm of a firm. These results hold across various corporate policies and outcomes including leverage, stock volatility, cash holdings, acquisitiveness, and CEO compensation structure.

"Local Gambling Preferences and Corporate Innovative Success" Free Download
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
FIRN Research Paper

YANGYANG CHEN, Monash University - Department of Accounting and Finance, Financial Research Network (FIRN)
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EDWARD J. PODOLSKI, La Trobe University
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S. GHON RHEE, University of Hawaii at Manoa - Shidler College of Business
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MADHU VEERARAGHAVAN, T.A. PAI Management Institute, Finance Area
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This paper examines the role of local attitudes towards gambling on corporate innovative activity. Using a county’s Catholics-to-Protestants ratio as a proxy for local gambling preferences, we find that firms located in gambling-prone areas tend to undertake riskier projects, spend more on innovation, and experience greater innovative output. We contrast the local gambling effect with CEO overconfidence, another behavioral effect reported to influence innovation. We find that local gambling preferences are a stronger determinant of innovative activity, with CEO overconfidence being more relevant to innovation in areas where gambling attitudes are strong.

"Trust and Controllability in Venture Capital Fundraising" Free Download
Journal of Business Research, Forthcoming

TOBIAS KOLLMANN, University of Duisburg-Essen
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ANDREAS KUCKERTZ, University of Hohenheim
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NILS MIDDELBERG, University of Hohenheim - Faculty of Business, Economics and Social Sciences
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This study discusses a model of success in venture capital (VC) fundraising. We develop this model based on agency and trust theory. The model is tested against quantitative data collected from 151 limited partners (LP) with headquarters predominantly in North America and Europe. Beyond the well-known criterion of the VC firm’s track record, results suggest trust and perceived controllability shape the investment decisions of those LPs. Moreover, antecedents of these main factors are evaluated. In sum, this study shows how fundraising VC firms can systematically manage the fundraising process.

"Influence of CEO Social Status on Acquisitiveness" Free Download

YULIA PLAKSINA, Dublin City University Business School
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LIAM A. GALLAGHER, Dublin City University Business School
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MICHAEL M. DOWLING, Dublin City University Business School
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We fi nd a signifi cant negative relationship between high social status and CEO acquisitiveness, both in terms of frequency of acquisitions as well as their relative size. Utilising a sample of S&P 500 CEOs between 1992 and 2012, we distinguish between ascribed (inherited) and achieved social status, which provides a better understanding of the channels through which status affects M&A decision making. Ascribed status is measured through educational prestige, and achieved status is proxied through influential business awards. Possessing high ascribed status results in a 30 percent lower level of M&A activity compared to marginal status CEOs. High achieved status executives are approximately two to four times less acquisitive compared to low status CEOs in the several years following elevation in status. We further demonstrate that the influence of status is strongest among executives who possess both status types simultaneously. These dual-elite-status CEOs show a 60 percent lower level of acquisitiveness compared to executives with low social status.

"CEO Narcissism and the Impact of Interlocks on Corporate Strategy" Free Download
Administrative Science Quarterly, Forthcoming

DAVID H. ZHU, Arizona State University (ASU) - W. P. Carey School of Business
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GUOLI CHEN, INSEAD - Singapore
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We examine how CEO narcissism influences the impact of interlocks on interorganizational imitation of corporate strategy. Our theory explains why narcissistic CEOs are influenced more by the corporate strategies that they witnessed on other boards, and less by the corporate strategies witnessed by other directors. We then explain why these effects are strengthened by the status of other firms to which the CEO had interlock ties and by the CEO’s power vis-à-vis the board. Results based on longitudinal analyses of Fortune 500 companies’ decisions on acquisition emphasis of growth strategy and international diversification (1997-2006) provide support for our theoretical expectations. This study contributes to organization research by introducing personality psychology theories to the literature of interorganizational imitation and to corporate governance research on board functions.

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About this eJournal

Sponsored by: IRRC Institute

This eJournal distributes working and accepted paper abstracts that deal with all aspects of governance related to sociology and psychology. The journal welcomes research with a focus on using tools and methods from the fields of sociology and psychology to study corporate governance. Topics of interest include, but are not limited to, how corporate governance arrangements are shaped by or shape social norms, psychological inclinations, and cognitive perceptions.

Authors submitting their work to the CGN network should submit it to no more than two CGN eJournals. In particular, they should submit it to no more than one "methodological" CGN eJournal (CG & Accounting; CG & Economics; CG & Finance; CG & Law; CG & Management; CG & Sociology or Psychology; CG Educator; CG Practice Series), and should submit it to no more than one of the "sub-field" journals (Acquisitions, Mergers, Contests for Control, & Activism; Actors & Players; Arrangements & Laws; Bankruptcy, Financial Distress, & Reorganization; Capital Raising, Investments, Distributions, & Market Trading; Comparative; Compensation of Executives & Directors; Economic Consequences, History, Development, & Methodology; Disclosure, Internal Control, & Risk-Management; Governance, Organization, & Processes; Governance of Special Types of Firms; International/Non-US; or Social Responsibility & Social Impact).

Editor: Lucian A. Bebchuk, Harvard University

Submissions

To submit your research to SSRN, sign in to the SSRN User HeadQuarters, click the My Papers link on left menu and then the Start New Submission button at top of page.

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If your organization is interested in increasing readership for its research by starting a Research Paper Series, or sponsoring a Subject Matter eJournal, please email: RPS@SSRN.com

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Corporate Governance Network (CGN), a division of Social Science Electronic Publishing (SSEP) and Social Science Research Network (SSRN)

Directors

CGN SUBJECT MATTER EJOURNALS

LUCIAN A. BEBCHUK
Harvard Law School, National Bureau of Economic Research (NBER), Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)
Email: bebchuk@law.harvard.edu

Please contact us at the above addresses with your comments, questions or suggestions for CGN-Sub.

Advisory Board

Corporate Governance & Sociology or Psychology eJournal

PATRICK BOLTON
Barbara and David Zalaznick Professor of Business, Columbia Business School - Department of Economics, Fellow, Centre for Economic Policy Research (CEPR), National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

BRIAN R. CHEFFINS
S.J. Berwin Professor of Corporate Law, University of Cambridge - Faculty of Law, Fellow, European Corporate Governance Institute (ECGI)

JOHN C. COFFEE
Adolf A. Berle Professor of Law and Director of the Center on Corporate Governance, Columbia Law School, Fellow, European Corporate Governance Institute (ECGI), Fellow, American Academy of Arts & Sciences

JULIAN R. FRANKS
Professor of Finance, London Business School, Fellow, Centre for Economic Policy Research (CEPR), Fellow, European Corporate Governance Institute (ECGI)

HENRY HANSMANN
Augustus E. Lines Professor of Law, Yale Law School, Fellow, European Corporate Governance Institute (ECGI)

OLIVER D. HART
Andrew E. Furer Professor of Economics, Harvard University - Department of Economics, National Bureau of Economic Research (NBER)

BENGT R. HOLMSTRÖM
Paul A. Samuelson Professor of Economics, Massachusetts Institute of Technology (MIT) - Department of Economics, National Bureau of Economic Research (NBER), European Corporate Governance Institute (ECGI)

KLAUS J. HOPT
Director (em.), Max Planck Institute for Comparative and International Private Law, European Corporate Governance Institute (ECGI)

MICHAEL C. JENSEN
Jesse Isidor Straus Professor of Business Administration, Emeritus, Harvard Business School, Co-Founder, Chairman, Managing Director and Integrity Officer, Social Science Electronic Publishing (SSEP), Inc., Research Associate, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

HIDEKI KANDA
Professor of Law, University of Tokyo - Graduate School of Law and Politics

STEVEN NEIL KAPLAN
Neubauer Family Professor of Entrepreneurship and Finance, University of Chicago - Booth School of Business, National Bureau of Economic Research (NBER)

RAKESH KHURANA
Marvin Bower Professor of Leadership Development, Harvard Business School

DAVID F. LARCKER
James Irvin Miller Professor of Accounting, Stanford University - Graduate School of Business

CHRISTIAN LEUZ
J. Sondheimer Professor of International Economics, Finance and Accounting, University of Chicago - Booth School of Business, Research Associate, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI), Fellow, Center for Financial Studies (CFS), Fellow, University of Pennsylvania - Wharton Financial Institutions Center, Fellow, CESifo Research Network

MARCO PAGANO
Professor of Economics, University of Naples Federico II - Department of Economics and Statistics, President, Einaudi Institute for Economics and Finance (EIEF), Fellow, Centre for Economic Policy Research (CEPR), Fellow, European Corporate Governance Institute (ECGI)

RAGHURAM G. RAJAN
Eric J. Gleacher Distinguished Service Professor of Finance, University of Chicago - Booth School of Business, International Monetary Fund (IMF), National Bureau of Economic Research (NBER)

ROBERTA ROMANO
Sterling Professor of Law and Director, Yale Law School Center for the Study of Corporate Law, Yale Law School, Research Associate, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

ANDREI SHLEIFER
Professor of Economics, Harvard University - Department of Economics, Fellow, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

LAURA T. STARKS
Charles E. and Sarah M. Seay Regents Chair in Finance, University of Texas at Austin - Department of Finance

RENE M. STULZ
Everett D. Reese Chair of Banking and Monetary Economics, Ohio State University (OSU) - Department of Finance, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

JEAN TIROLE
Scientific Director, University of Toulouse 1 - Industrial Economic Institute (IDEI), University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ), Fellow, Centre for Economic Policy Research (CEPR)

LUIGI ZINGALES
Robert C. McCormack Professor of Entrepreneurship and Finance and David G. Booth Faculty Fellow, University of Chicago - Booth School of Business, National Bureau of Economic Research (NBER), Fellow, Centre for Economic Policy Research (CEPR), University of Chicago - Polsky Center for Entrepreneurship, Fellow, European Corporate Governance Institute (ECGI)