Managerial Overconfidence and Debt Decisions

The application of behavioural theory to corporate finance is now attracting the attention of theoretical work. However, very little rigorous empirical work has been carried out to analyse the desirability of behavioural biases in relation to financing decisions. The main results argue that managerial overconfidence provides an alternative determinant of capital structure. However, many questions remain to be explored, related to overconfidence measures and positive/negative effects of managerial overconfidence. Our paper assumes that the combination of financial theory and behavioural theory leads to better explanatory power. We follow two complementary goals. Firstly, we examine the dynamic trade-off model introducing a behavioural perspective. Secondly, we propose extending the pecking order analysis to incorporate overconfidence in Shyam-Sunder and Myers＇s model. We use a sample of Tunisian firms and employ panel-data estimation procedures to account for endogeneity and spurious correlation issues. Our results confirm the assumption that manager confidence is positively related to debt level. Overconfident managers underestimate the probability of financial distress and will choose higher levels of debt than they would if they were ＂rational＂.

Responses of a resident group to an outsider in the blue-breasted quail: A paradigm for studying social resettlement of dispersers

Dispersal is an individual life-history trait that can influence the ecological and evolutionary dynamics of both the source and recipient populations.Current studies of animal dispersal have paid little attention to how the responses of residents in a recipient population affect the social resettlement of dispersers into a new habitat.We addressed this question in the blue-breasted quail Synoicus chinensis by designing an outsider introduction experiment to simulate a scenario of interaction between residents and dispersers.In the experiment,we introduced an unfamiliar quail into a group of 3 differently ranked residents and then examined their behavioral responses to the arrival of the outsider.We found that all residents made negative responses by pecking at the outsider to maintain their pecking order,in which high-ranked residents displayed significantly greater intensity than those of lower ranks.This result highlighted that adverse behavioral responses of residents would prevent outsiders from obtaining hierarchical dominance in the recipient group.Moreover,the residents’sex ratio,their relative ages to the outsiders,and whether outsiders counter-pecked at the residents all influenced the probability of outsiders prevailing against the residents.Those outsiders that displayed counter-peck courage were more likely to gain higher dominance and hence resettle into the recipient group successfully.Our findings suggest that resident groups may impose a selection among dispersers via adverse behavioral responses.Therefore,social factors that can influence the resettlement step of dispersers in a new habitat should be accounted for in future studies of animal dispersal.