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Are Overconfident CEOs Better Innovators?

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  • DAVID HIRSHLEIFER
  • ANGIE LOW
  • SIEW HONG TEOH

Abstract

Using options- and press-based proxies for CEO overconfidence (Malmendier and Tate 2005a, 2005b, 2008), we find that over the 1993-2003 period, firms with overconfident CEOs have greater return volatility, invest more in innovation, obtain more patents and patent citations, and achieve greater innovative success for given research and development (R&D) expenditure. Overconfident managers only achieve greater innovation than non-overconfident managers in innovative industries. Overconfidence is not associated with lower sales, ROA, or Q.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1111/j.1540-6261.2012.01753.x
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Bibliographic Info

Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 67 (2012)
Issue (Month): 4 (08)
Pages: 1457-1498

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Handle: RePEc:bla:jfinan:v:67:y:2012:i:4:p:1457-1498

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References

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Overconfident CEOs are better
    by Economic Logician in Economic Logic on 2010-06-16 14:00:00
  2. Weekly Wisdom Roundup # 83- The Smartest Linkfest On The Web
    by Miguel in Simoleon Sense on 2010-06-20 19:32:27
  3. [経済]自信過剰なCEOがイノベーションを推し進める
    by himaginary in himaginaryの日記 on 2012-08-02 07:00:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Yusuke Kinari & Noriko Mizutani & Fumio Ohtake & Hiroko Okudaira, 2011. "Overconfidence Increases Productivity," ISER Discussion Paper 0814, Institute of Social and Economic Research, Osaka University.
  2. Croci, Ettore & Jankensgård, Håkan, 2014. "CEO Age, Risk Incentives and Hedging Instrument Choice," Knut Wicksell Working Paper Series 2014/3, Knut Wicksell Centre for Financial Studies, Lund University.
  3. Adam, Tim R. & Burg, Valentin & Scheinert, Tobias & Streitz, Daniel, 2014. "Managerial Optimism and Debt Contract Design: The Case of Syndicated Loans," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 475, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  4. Keloharju, Matti & Knüpfer, Samuli, 2014. "Match Made at Birth? What Traits of a Million Swedes Tell Us about CEOs," Working Paper Series, Research Institute of Industrial Economics 1024, Research Institute of Industrial Economics.
  5. Francis, Bill & Hasan, Iftekhar & Park, Jong Chool & Wu, Qiang, 2014. "Gender differences in financial reporting decision-making: Evidence from accounting conservatism," Research Discussion Papers 1/2014, Bank of Finland.
  6. Philipp Meyer-Brauns, 2014. "Optimal Auditing with Heterogeneous Audit Perceptions," Working Papers, Max Planck Institute for Tax Law and Public Finance tax-mpg-rps-2014-06, Max Planck Institute for Tax Law and Public Finance.
  7. Schrand, Catherine M. & Zechman, Sarah L.C., 2012. "Executive overconfidence and the slippery slope to financial misreporting," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 53(1), pages 311-329.
  8. AZOUZI Mohamed Ali & JARBOUI Anis, 2013. "Why CEO Emotional Biases Affect Firm Assets Specificity Choice Bayesian Network Method: The Evidence from Tunisia," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(3), pages 329-350, March.
  9. Loureiro, Gilberto & Makhija, Anil K. & Zhang, Dan, 2011. "Why Do Some CEOs Work for a One-Dollary Salary?," Working Paper Series 2011-7, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  10. Andriosopoulos, Dimitris & Andriosopoulos, Kostas & Hoque, Hafiz, 2013. "Information disclosure, CEO overconfidence, and share buyback completion rates," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5486-5499.
  11. Campbell, T. Colin & Gallmeyer, Michael & Johnson, Shane A. & Rutherford, Jessica & Stanley, Brooke W., 2011. "CEO optimism and forced turnover," Journal of Financial Economics, Elsevier, Elsevier, vol. 101(3), pages 695-712, September.

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