Intelligence, trust & financial decisions · Original source
Ibrahim Filiz; Jan René Judek; Marco Lorenz; Markus Spiwoks
Algorithms already carry out many tasks more reliably than human experts. Nevertheless, some subjects have an aversion towards algorithms. In some decision-making situations an error can have serious consequences, in others not. In the context of a framing experiment, we examine the connection between the consequences of a decision-making situation and the frequency of algorithm aversion. This shows that the more serious the consequences of a decision are, the more frequently algorithm aversion occurs. Particularly in the case of very important decisions, algorithm aversion thus leads to a reduction of the probability of success. This can be described as the tragedy of algorithm aversion.
Intelligence, trust & financial decisions · Solutions companion
Family Office Private Wealth Journal · Editorial research desk
AI-assisted editorial analysis. The source reports an experiment with 143 students at a German university. Participants chose between a human expert and an algorithm in one of six framed service scenarios. The algorithm was assigned a seventy percent success probability and the human expert sixty percent, with the same monetary incentive across scenarios. Participants were less likely to select the algorithm in scenarios perceived as more serious. This provides a useful question for family-office technology governance: does the perceived gravity of a task alter willingness to use a tool even when its performance information is held constant?
Intelligence, trust & financial decisions · Original source
Alin Marius Andries; Daniela Balutel; Iulian Ihnatov; Silviu Gabriel Ursu
In this study we assess the impact of corporate governance on the risk investment behavior of firms and its implications on firms’ growth rate. Using a sample of non-financial companies from 10 countries over a period leading to the recent global financial crisis, we documented that the corporate governance has a nonlinear (inverted U-shape) impact on the companies’ investment risk, meaning that the investment risk is increasing up to a level of corporate governance of 0.61 (as measured by our comprehensive index), while at higher levels of corporate governance the investment risk is decreasing. For the models of sales growth and assets growth it is shown that predicted investment risk has a positive effect on firms’ growth measures. Moreover, the two growth models are not moving independently and a shock to one of the growth measures (sales or assets) affects the other growth measure in the same direction. Additionally, we evaluated the effect of financial crisis on both the growth measures and the risk measure. The effect of financial crisis was captured in both measures in 2009, with higher impact on the growth of sales.
Intelligence, trust & financial decisions · Solutions companion
Family Office Private Wealth Journal · Editorial research desk
AI-assisted editorial analysis. The source studies large nonfinancial listed companies across ten countries using data from 2004 through 2009. It reports an inverted-U relationship between a composite corporate governance index and a measure of investment risk, followed by positive associations between instrumented risk and growth in sales or assets. The reported turning point of approximately 0.61 belongs to that index, sample and model. It is not a recommended governance score for a family office, and it is not evidence that reducing safeguards will increase returns. The paper is most useful as a prompt to examine how oversight shapes both protection and decision capacity.
Intelligence, trust & financial decisions · Original source
Abdullah A. K. Alkhawaldeh; Jamil J. Jaber; Dalila Boughaci; Noriszura Ismail
Corporate governance is the way of governing a firm in order to increase its accountability and to avoid any massive damage before it occurs. The aim of this paper is to investigate the impact of capital structure, firms’ size, and competitive advantages of firms as control variables on credit ratings. We investigate the role of corporate governance in improving the firms’ credit rating using a sample of Jordanian listed firms. We split firms into four categories according to WVB credit rating. We use both the binary logistic regression (LR) and the ordinal logistic regression (OLR) to model credit ratings in Jordanian environment. The empirical results show that the control variables are strong determinants of credit ratings. When we evaluate the relationship between the governance variables and credit ratings, we found interesting results. The board stockholders and board expertise are moderately significant. The board independence and role duality are weakly significant, while board size is insignificant.
Intelligence, trust & financial decisions · Solutions companion
Family Office Private Wealth Journal · Editorial research desk
A proposed family-office credit review separates repayment capacity from board reputation, translates the source variables carefully and tests conflicts between controlling owners and creditors.
Private capital & investment governance · Original source
Jie Deng; Li Yao; Mengyi Chen; Qingsong He
The effect of demand uncertainty reduction (DUR) on supply chain management has received tremendous attention. From a financial perspective, studying the impact of DUR is equally significant. This study explores the relationship between DUR and private equity (PE) financing in retail enterprises within a supply chain, which comprises a dominant supplier and a subordinate retailer. This article establishes decision models for a retailer backed by PE under three market demand conditions: range, mean, and range with mean. The study further investigates the impact of partial demand uncertainty reduction (PDUR) on the retailer and PE through comparative analysis of these scenarios. To address incomplete market demand information during the decision-making process, the study employs the minimax regret criterion to construct and solve the model. An intriguing finding of this study is that contrary to intuition, PDUR not only fails to promote PE but also reduces the retailer’s willingness to finance and decreases the asset size for both the retailer and PE. In addition, the better the growth potential for the retail enterprise, the more severe the negative impact brought about by PDUR. Moreover, the impact of PDUR on supplier and supply chain performance is two-fold. PDUR based on range information has a negative impact on the expected profit of the supplier and the supply chain, while PDUR based on mean information has a positive impact on their expected profit.
Private capital & investment governance · Solutions companion
Family Office Private Wealth Journal · Editorial research desk
A decision protocol for evaluating growth capital when a retailer learns more about the range or mean of demand. Keep financing need, supplier bargaining power and forecast quality separate.
Governance & succession · Original source
Stephen P. Miller
Effective next-generation leadership is central to the multi-generational survival of family businesses. This study of 100 next-generation family business leaders found that business-owning families that openly express their opinions, take time to listen to each other, and squarely address difficult issues positively influence the development of the emotional and social intelligence competencies in next-generation family leaders that drive their leadership effectiveness. That kind of open and transparent communication in the family also makes it more likely next-generation leaders will be held accountable for their leadership performance by others, which increases the degree to which they are positively engaged with their work in the family firm. On the other hand, the results suggest that senior-generation family leaders who lead autocratically, a leadership style often observed in entrepreneurs who found family firms, make it less likely that next-generation family leaders will learn the emotional and social intelligence competencies that predict their leadership effectiveness. The study also found that autocratic senior-generation leaders negatively affect next-generation leader self-efficacy and make it less likely that others will hold them accountable, which limits their engagement with work in the family business. One of the study’s most important findings is that next-generation leader acceptance of personal responsibility for their leadership behaviors and results serves as a mediator through which the nature of the family climate influences their leadership effectiveness and work engagement. This suggests that while the nature of family relationships may make it easier or more difficult, next-generation family leaders have ultimate control over the development of their leadership talent and the inspiration, enthusiasm, energy, and pride they feel when working in the family business.
Governance & succession · Solutions companion
Family Office Private Wealth Journal · Editorial research desk
A proposed succession-development process translates Miller’s multi-rater family-business research into bounded authority, confidential feedback and accountable learning, while preserving the limits of cross-sectional evidence.
Private capital & investment governance · Original source
Di Gao; Jiangming Ma; Yiru Wang
In the operation and management of the company, major customers may affect a supplier firm’s level of governance. The goal of our study is investigating whether a major customer acts as an important role in corporate governance in emerging markets and exposing the mechanism that how major customers affect corporate decision-making. There is a growing body of literature involving studies about the effect of customer concentration on firm performance of western countries. Few studies have recognized to what degree does customer concentration satisfy the sustainable development of supplier firm. Using a sample of Chinese listed firms, we found a nonlinear relationship between customer concentration and risk-taking, corporate policies and firm performance. Evidence shows that the effect of customer concentration in China resembles an inverted U-shaped curve and major customers are crucial in financial and investment policies. Our results help to provide a broader perspective on the role of major customers, giving a deep explanation about the role of customer concentration in corporate governance.
Private capital & investment governance · Solutions companion
Family Office Private Wealth Journal · Editorial research desk
A direct-investment committee can distinguish concentration from contractual dependence by tracing customer shares through tooling commitments, replacement timelines and cash availability. This AI-assisted editorial analysis proposes a diligence procedure; it reports no new investment results.