Conglomerate Investment, Skewness, and the CEO Long-Shot Bias

• 成果类型: Article
• 署名作者: Schneider, Christoph; Spalt, Oliver
• 署名单位: University of Mannheim; Tilburg University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12379
• 发表日期: 2016
• 页码: 635-672
• 关键词: internal capital-markets; prospect-theory; dark side; cash flow; lotteries; diversification; stocks; probability; COMPETITION; preference

摘要

Do behavioral biases of executives matter for corporate investment decisions? Using segment-level capital allocation in multisegment firms (conglomerates) as a laboratory, we show that capital expenditure is increasing in the expected skewness of segment returns. Conglomerates invest more in high-skewness segments than matched stand-alone firms, and trade at a discount, which indicates overinvestment that is detrimental to shareholder wealth. Using geographical variation in gambling norms, we find that the skewness-investment relation is particularly pronounced when CEOs are likely to find long shots attractive. Our findings suggest that CEOs allocate capital with a long-shot bias.