Vikalpa: The Journal for Decision Makers

Capital structure decisions are vital for firms. Existing theories on capital structure partially explain the difference in capital structure decisions of identical firms. Researchers have integrated psychology with finance in recent years to explain the difference in capital structure decisions better. To help practitioners and academicians understand the role of psychology in capital structure decisions, this article focuses on CEO overconfidence and its influence on equity versus debt financing, short-term versus long-term debt financing, and level of debt financing concerning tax shields. Indian CEOs are unique in their leadership style, values and beliefs. Overconfidence among CEOs of S&P BSE 200 firms is measured using the press coverage of CEOs, and this proxy depicts how the press portrays CEOs. An extensive search on CEOs in relevant search engines helped measure overconfidence among CEOs. The results from regression models document that overconfident CEOs prefer debt over equity and short-term debt over long-term debt. In addition, overconfident CEOs are found to not avail the full benefits of tax shield and follow a conservative debt policy. The presence of bias of overconfidence among CEOs distorts optimal decision-making and deviates capital structure decisions from trade-off theory and pecking order theory of capital structure. The evidence on external versus internal financing helps explain the biased preference of overconfident CEOs for debt and short-term financing. The biased beliefs lead CEOs to form high expectations of cash flows. Overconfidence among CEOs is found to significantly influence capital structure decisions. The robustness of the results corroborates existing findings and documents the influence of behavioural biases on corporate decision-making.

This study is located in the context of high-performance work systems (HPWS) in India. Extant literature indicates that the darker side of HPWS and work intensification impact employee lives and trigger work–family conflict (WFC) experiences. With the shift in organizational focus on employee well-being, it has become imperative to understand and unpack WFC experiences of employees in the Indian sociocultural context to design effective and contextual remedial mechanisms. Responding to this need, WFC experiences of employees in Indian HPWS contexts were closely examined in this study to unpack the role of prevalent sociocultural factors. Additionally, the study explored how employees coped with these life situations. Since organizations are now beginning to work towards enhancing the well-being of employees, this study offers insights into what coping mechanisms are deliberately or inadvertently in use to evaluate their effectiveness. Studying the nature of WFCs and coping mechanisms from a sociocultural lens, this study identifies and develops four major themes. Passive acceptance of WFC, unambiguous communication, emotional and instrumental support from family, informational support at work emerged as the four significant themes discussed at length in this article. Insights generated from the discussion of these themes point overarchingly towards the highly personalized and localized, individual-level approach prevalent amongst employees of HPWS in response to WFC episodes. The discussion and conclusion sections highlight the need for well-designed and mindful organizational interventions built upon an understanding of the sociocultural factors at work to effectively mitigate the employee stress generated by the HPWS environments. This work is especially relevant in an era of pandemic-related work models, millennial workers and work intensification due to the increased digitalization of workplace practices.