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The bright side of managerial over-optimism

Author

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  • Hilary, Gilles
  • Hsu, Charles
  • Segal, Benjamin
  • Wang, Rencheng

Abstract

Human estimation and inference are subject to systematic biases such as overconfidence and over-optimism. In contrast to prior research that has identified multiple negative consequences of these biases, we focus on positive effects. We empirically examine a setting in which over-optimism a) is a related but different bias from overconfidence, b) emerges dynamically in a rational economic framework, and c) generates higher managerial effort. Importantly, this additional effort improves firm profitability and market value.

Suggested Citation

  • Hilary, Gilles & Hsu, Charles & Segal, Benjamin & Wang, Rencheng, 2016. "The bright side of managerial over-optimism," Journal of Accounting and Economics, Elsevier, vol. 62(1), pages 46-64.
  • Handle: RePEc:eee:jaecon:v:62:y:2016:i:1:p:46-64
    DOI: 10.1016/j.jacceco.2016.04.001
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    More about this item

    Keywords

    Over-optimism; Managerial effort; Firm performance;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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