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Self‐serving attribution and managerial investment decision

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  • Chune Young Chung
  • Changhwan Choi
  • Amirhossein Fard

Abstract

This study examines whether managerial overconfidence coupled with self‐attribution bias distorts the investment decisions of firms. To this end, we investigate the impact of overconfidence on asymmetric investment cash flow sensitivity (ICS). We find that managerial overconfidence affects ICS in a downward‐sticky direction, which is reinforced by overconfidence coupled with managerial self‐attribution. The results for both unconstrained and constrained firms are qualitatively consistent with those for the overall sample; however, the constrained subsample provides slightly weaker results. Thus, our findings indicate that managerial overconfidence and self‐attribution to recent successes may induce managers to make excessive investment commitments.

Suggested Citation

  • Chune Young Chung & Changhwan Choi & Amirhossein Fard, 2024. "Self‐serving attribution and managerial investment decision," Bulletin of Economic Research, Wiley Blackwell, vol. 76(3), pages 749-772, July.
    • Handle: RePEc:bla:buecrs:v:76:y:2024:i:3:p:749-772
    DOI: 10.1111/boer.12444
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