We examine the role of CEO behavioral characteristics in the design of debt covenants. The behavioral finance literature that examines the consequences of behavioral biases of managers has primarily focused on managerial optimism and overconfidence; traits that have been shown to be prevalent in managers (see Malmendier and Tate (2005, 2008) and Ben-David, Graham, and Harvey, 2007). DellaVigna (2009) points out that the standard model of behavior in economics assumes, among other things, that individuals on average hold correct beliefs about the distribution of states of the world. Experimental evidence however suggests that such an assumption is not valid and individuals tend to maintain overconfident beliefs. Overconfident managers “systematically overestimate the probability of good firm performance and underestimate the probability of bad firm performance” (Heaton, 2002). As a result they have been found to display hubris (Roll, 1986) that manifests in inefficient investment decision and value destroying acquisitions (Malmendier and Tate, 2008).
Despite the growing evidence on the effects of managerial overconfidence on corporate decisions, it is unclear whether investors incorporate such overconfidence in contracting with firms with overconfident CEOs. This study sheds light on this issue by examining how debt investors contract with firms in the presence of overconfident CEOs. We particularly focus on debt contracts because Malmendier and Tate (2005) show that overconfident managers avoid equity financing and rely on internal cash and debt to fund projects. Thus, our primary research question is: how do debt investors structure debt covenants when faced with overconfident managers accessing public debt markets for financing?
As you start working on the actual adjustments to optimize your images, basic tonal and color adjustments provide the foundation for building the final result. Having a firm understanding of how to apply this basic adjustments wil ensure you are working toward the best quality from the beginning.
For many images, these may be the only adjustments you need. For other images, these adjustments represent the first step toward producing an image that matches the vision you had when you first clicked the shutter release.
This is the fourth release of the ComponentOne Studio for Silverlight. The controls in the Studio takeadvantage of the new features in Microsoft Silverlight 2.0 Beta 2, including layout management, templates, data-binding, visual state manager, etc. The controls in the Studio integrate and complement the ones that ship with Silverlight 2.0.
We will ship updates to the Studio on a monthly basis up until the first Silverlight 2.0 release, so make sure to check for updates at www.componentone.com. Your feedback is especially welcome at this stage. If you have requests, comments, or suggestions, please let us know at our Silverlight forum: http://forums.componentone.com/CS/forums/78.aspx.
