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CEO overconfidence: Towards a new measure

Author

Listed:
  • Khalil Hatoum

    (PRISM Sorbonne - Pôle de recherche interdisciplinaire en sciences du management - UP1 - Université Paris 1 Panthéon-Sorbonne, Labex ReFi - UP1 - Université Paris 1 Panthéon-Sorbonne)

  • Christophe Moussu

    (ESCP-EAP - ESCP-EAP - Ecole Supérieure de Commerce de Paris)

  • Roland Gillet

    (PRISM Sorbonne - Pôle de recherche interdisciplinaire en sciences du management - UP1 - Université Paris 1 Panthéon-Sorbonne, Labex ReFi - UP1 - Université Paris 1 Panthéon-Sorbonne, CEBRIG - Centre Emile Bernheim Solvay Brussels School of Economics and Management)

Abstract

Bayesian network theory is used to construct a novel probability-based measure for CEO overconfidence. This measure is estimated by studying the probabilistic correlation between CEO overconfidence and several CEO- and firm-specific determinants of overconfidence, that have been documented in the literature. Using S&P 500 firms over the period 2007–2017, we show that the established Bayesian network model has a high fitting and prediction accuracy of CEO overconfidence. This novel measure of CEO overconfidence can be used to conduct empirical studies in corporate and behavioral finance. It also provides a tool to improve decision-making in firms and corporate governance.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Khalil Hatoum & Christophe Moussu & Roland Gillet, 2022. "CEO overconfidence: Towards a new measure," Post-Print hal-03794545, HAL.
    • Handle: RePEc:hal:journl:hal-03794545
    DOI: 10.1016/j.irfa.2022.102367
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    Cited by:

    1. Guo, Guangyu & Lin, Ouwen & Li, Yan & Ruan, Jiyang, 2024. "Corporate carbon emission governance: The mediating role of financial leverage," International Review of Economics & Finance, Elsevier, vol. 96(PC).
    2. Gurdgiev, Constantin & Ni, Qiuxin, 2023. "Board diversity: Moderating effects of CEO overconfidence on firm financing decisions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).

    More about this item

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • G40 - Financial Economics - - Behavioral Finance - - - General

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