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Eliciting managerial willingness to invest: A revealed-preference approach

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  • Kang, Qiang
  • Liu, Qiao

Abstract

Decision-making entails two underlying economic forces – capacity and willingness of taking on the subject under considerations. Capacity reflects available opportunities and typically weighs benefits against costs of the decision. Willingness pertains to the decision maker’s tolerance for the risk associated with this decision. Compared to capacity, willingness is arguably more primal and much harder to quantify. Our study illustrates a way to divulge managerial willingness by applying a revealed-preference approach toward a large sample of U.S. firms’ investment decisions in the setting of staggered passages of U.S. state antitakeover laws. Our results suggest that takeover threats suppress managerial desire to invest and that governments play a vital role in affecting managerial risk preference, and in turn, corporate strategic choices. Our approach, with modifications and refinements, has the potential of a broad application toward understanding how and under what conditions managerial willingness affects the decision-making processes.

Suggested Citation

  • Kang, Qiang & Liu, Qiao, 2023. "Eliciting managerial willingness to invest: A revealed-preference approach," Journal of Business Research, Elsevier, vol. 155(PB).
    • Handle: RePEc:eee:jbrese:v:155:y:2023:i:pb:s0148296322008402
    DOI: 10.1016/j.jbusres.2022.113375
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    More about this item

    Keywords

    Managerial willingness to invest; Investment Euler equation; Generalized method-of-moments estimator; State antitakeover laws; Capital expenditure; Acquisitions and/or R&D;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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