CEOs and Firm Policy: A Behavioural Perspective

  • Ali Bayat

Student thesis: Phd


This thesis takes a behavioural perspective in investigating three topics at the intersection of Corporate Governance, CEO behaviour and Firm policy. The first essay investigates CEO option exercise behaviour and examines the validity of option-based measures of overconfidence. The option-based measures of overconfidence are based on CEO's holding of vested options and follow the logic that CEOs who repeatedly keep their vested options and tie their wealth to firm idiosyncratic risk must be overconfident in their ability to create value for the firm. This research introduces 'Rational Optimisim' as an alternative explanation for why CEOs hold their exercisable options; CEOs keep their options in firms with sound financial condition and exercise their options in firm with no prospect. This research finds that the pattern in the data is consistent with both explanations and questions the validity of option-based measures of overconfidence. The second essay argues that culture can shape corporate control and introduces a new explanation for hostile takeover resistance. Honor culture is characterised by reputation maintenance and defence. It shows that firms in honor places are more resistant to hostile takeovers and are more likely to win the corporate control contests. The third essay investigates CEO political ideology as a determinant of CEO attitude towards firm stakeholders. It examines the effect of CEO political ideology on corporate dividend policy. It finds that firms led by liberal CEOs are more likely to be non-dividend paying firms and have consistently lower dividend payouts; the results are stronger when these CEOs are more powerful and when the strength of shareholder rights is weak. This research also reveals that conservative CEOs have a specific managerial style and pay more dividends at the cost of the employees.
Date of Award31 Dec 2018
Original languageEnglish
Awarding Institution
  • The University of Manchester
SupervisorPeter Kawalek (Supervisor) & Mohammad Salehnejad (Supervisor)


  • Behavioral Theory
  • CEO Overconfidence
  • CEO Political Ideology
  • Hostile Takeover Resistance
  • Culture of Honor
  • CEO Option Exercise
  • Firm Policy
  • CEOs
  • Corporate Governance
  • Dividend Payout

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