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Are Overconfident CEOs Better Innovators?

  • DAVID HIRSHLEIFER
  • ANGIE LOW
  • SIEW HONG TEOH

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.

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