September 23rd, 2004
CEOs unnecessarily risk averse, say Wharton experts
The lack of confidence among executives is the underlying cause for the slew of profit warnings technology companies announced at the end of the second quarter this year,say experts at the Wharton School of Business. According to Wharton finance Professor Jeremy Siegel, capital spending from corporations has largely been absent during a consumer-fueled economic rebound, giving life to a new concern over corporate confidence. While he thinks that the spending dip seems to be a temporary lull, it’s too early to tell what the current thinking is inside cooperate boardrooms. But what is certain are the ongoing concerns over job growth, the war in Iraq, oil prices, and the presidential election. Federal Reserve Chairman Alan Greenspan summed up the current climate best in a testimony before Congress last June:
Even now, following the pattern of recent quarters, corporate investment in fixed capital and inventories apparently continues to fall short of cash flow. The protracted nature of this shortfall is unprecedented over the past three decades. Moreover, the proportion of temporary hires relative to total employment continues to rise, underscoring that business caution remains a feature of the economic landscape.
