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Corporate dividend policy is a puzzle, especially when considering the effects of economic and behavioural factors. We develop a theoretical analysis of corporate dividend policy in order to analyse the effects of the complex mix of managerial moral hazard, overconfidence, and myopia on managerial incentives to increase or decrease dividends. Furthermore, we consider the effect of investor irrationality that drives corporate dividend catering behaviour. We investigate how this complex mix of economic and behavioural factors is likely to affect dividend policy. Our analysis provides a deep theoretical underpinning to understanding these effects and provides a basis for future empirical research. [ABSTRACT FROM AUTHOR]

This paper investigates, theoretically and empirically, the impact of corporate hedging activities on firm value/performance. In a perfect market, with self-less management, aiming to maximise shareholder wealth, it may be expected that hedging would improve firm performance and add value. Our major contribution in this paper is that we first demonstrate theoretically the conditions under which hedging can increase or decrease firm value. Our theoretic model demonstrates that the ambiguous relationship between hedging and firm value may be due to a subtle combination of economic (managerial self-interest, agency problems/moral hazard, managerial ability, managerial risk aversion) and behavioural factors (overconfidence). Our empirical analysis confirms the ambiguous effect of hedging on firm performance. Empirically, we focus on the use of derivatives in the corporate hedging of three types of financial risk (foreign currency, interest rate and commodity price risks), and examine the effect on value and performance of listed UK corporations during 2005–2017. We demonstrate that the positive or negative effects of the hedging strategies varies significantly across both the financial risk that is hedged and the type of derivatives contracts used in the hedging as well as the time period in consideration. [ABSTRACT FROM AUTHOR]

We develop a formal game-theoretic analysis of the economic (value-adding abilities) and behavioural factors (empathy, emotional excitement, passion) affecting a development bank's choice of private-equity partner when investing into emerging market entrepreneurship. Triple-sided moral hazard (TSMH) problems occur in the form of effort-shirking, since the bank, the PE-manager, and the entrepreneur all contribute to value-creation. The bank's investment choices are crucially affected by a) the relative abilities and the potential level of empathy, excitement and passion that may be generated between a PE-manager and an entrepreneur, and b) the personal emotional attachment that the bank develops towards a PE. The severity of TSMH increases inefficiencies in decision-making. Finally, we consider, in addition to political risk mitigation, an additional impact that the bank may have on PE/E value-creation: the bank may have a coaching/mentoring role. Our analysis has implications for academics and practitioners alike. [ABSTRACT FROM AUTHOR]

We analyse the efficacy of hedge fund regulation in a behavioural game-theoretic model consisting of two players: a hedge fund manager and a regulator. The regulator decides whether or not to regulate hedge fund strategies, and location of key service providers (KSPs). The manager then decides (a) which KSP to choose, (b) whether to choose a safe or risky strategy, and (c) how much effort to exert in affecting the strategy’s success probability. We consider the effect of expected future fund flows on the manager’s incentives. Furthermore, we consider economic and behavioural factors affecting the regulator’s decision-making. Finally, we discuss how our two cases (myopic versus far-sighted managerial behaviour) may inform the debate over regulation over the entire financial market-cycle. Overall, our analysis contributes to the debate on hedge fund regulation. [ABSTRACT FROM AUTHOR]