What Is CEO Overconfidence? Evidence from Executive Assessments

Steven N. Kaplan, Morten Sorensen and Anastasia Zakolyukina

No 27853, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use detailed assessments of CEO personalities to explore the option-based measure of CEO overconfidence, Longholder, introduced by Malmendier and Tate (2005a) and widely used in the behavioral corporate finance and economics literatures. Longholder is significantly related to several specific characteristics and is negatively related to general ability. These relations also hold for overconfidence measures derived from CEOs’ earnings guidance. Investment-cash flow sensitivities are larger for both Longholder and less able CEOs. Overall, Longholder CEOs have many of the same characteristics traditionally associated with overconfident individuals, including lower general ability, supporting the interpretation of this measure as reflecting overconfidence.

JEL-codes: G31 G41 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-cfn
Note: CF
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Citations: View citations in EconPapers (3)

Published as Steven N. Kaplan & Morten Sørensen & Anastasia A. Zakolyukina, 2021. "What is CEO overconfidence? Evidence from executive assessments," Journal of Financial Economics, .

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Journal Article: What is CEO overconfidence? Evidence from executive assessments (2022)
Working Paper: What Is CEO Overconfidence? Evidence from Executive Assessments (2020)
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