Ambiguity and the corporation: Group disagreement and underinvestment

Garlappi, Lorenzo; Giammarino, Ron; Lazrak, Ali

doi:10.1016/j.jfineco.2017.06.005

Cited by 71 publications

(27 citation statements)

References 42 publications

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“…For the same reason, the value of debt decreases, but to a smaller extent. Thus, consistent with Garlappi et al (2017), investments that entail increased ambiguity may suffer from an under-investment problem.…”

Section: Introductionmentioning

confidence: 70%

Ambiguity and the Tradeoff Theory of Capital Structure

2022

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We examine the impact of ambiguity, or Knightian uncertainty, on the capital structure decision, using a static tradeoff theory model in which agents are both ambiguity and risk averse. The model confirms the well-known result that greater risk—the uncertainty over outcomes—leads firms to decrease leverage. Conversely, the model indicates that greater ambiguity—the uncertainty over the probabilities associated with the outcomes—leads firms to increase leverage. Using a theoretically based measure of ambiguity, our empirical analysis presents evidence consistent with these notions, showing that ambiguity has an important and distinct impact on capital structure. This paper was accepted by Gustavo Manso, finance.

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Section: Introductionmentioning

confidence: 70%

Ambiguity and the Tradeoff Theory of Capital Structure

2022

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“…It is worth noting that there are a number of studies documenting the dark side of diversity, namely, the presence of dissimilar directors on a board can increase coordination costs and decrease board members' ability to work together as a group on recommendations related to investment projects, acquisitions, and other key decisions (e.g.,Goodstein, Gautam, and Boeker (1994),Knyazeva, Knyazeva, and Raheja (2013),Adams, Akyol, and Verwijmeren (2018),Garlappi, Giammarino, and Lazrak (2017),Donaldson, Malenko, and Piacentino (2018), and Giannetti and Zhao (2019)). While diversity may become excessive and cause communication and coordination problems, this concern is unlikely to be severe for board gender diversity when there is only a small minority of women (on average, less than 9% of directors are women).3 Note that removing the country-year means from all firm-level observations in x i, j,t is equivalent to including country and year fixed effects in the within-country model of equation(1a).…”

mentioning

confidence: 99%

Board Gender Diversity and Corporate Innovation: International Evidence

Griffin¹,

Li²,

Xu³

2020

J. Financ. Quant. Anal.

225

102

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Using a novel database of firm patents and board characteristics across 45 countries, we examine both within- and cross-country determinants of board gender diversity and its relation to corporate innovation. Boards are more likely to include women in countries with narrower gender gaps, higher female labor market participation, and less masculine cultures. Firms with gender diverse boards have more patents and novel patents, and a higher innovative efficiency. Further analyses suggest that gender diverse boards are associated with more failure-tolerant and long-term chief executive officer (CEO) incentives, more innovative corporate cultures, and more diverse inventors, characteristics that are conducive to an improved innovative performance.

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“…There is evidence of negative effects of combining groups with heterogeneous experiences. Garlappi et al (2017) show, through the use of a theoretical model, that board heterogeneity leads to underinvestment. Gender is a potential example of such heterogeneity.…”

Section: Experiential Motivationmentioning

confidence: 99%

Motivating gender use in financial research: a survey of recent literature

Lahtinen

2019

RBF

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Purpose The purpose of this paper is to identify key channels through which gender is applied to financial research. Design/methodology/approach This paper is designed as a survey and review of relevant literature. Findings There are many theoretical and practical applications of gender in financial research. Originality/value This paper is the first to consolidate theoretical motivations for the use of gender in financial research.

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Ambiguity and the corporation: Group disagreement and underinvestment

Cited by 71 publications

References 42 publications

Ambiguity and the Tradeoff Theory of Capital Structure

Ambiguity and the Tradeoff Theory of Capital Structure

Board Gender Diversity and Corporate Innovation: International Evidence

Motivating gender use in financial research: a survey of recent literature

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