Managerial Overoptimism and Discretionary Disclosure

Nikolaj Niebuhr Lambertsen and Matthias Lassak

Journal of Business Finance & Accounting, 2026, vol. 53, issue 4, 1337-1356

Abstract: We examine the effect of managerial overoptimism on discretionary disclosure of subjective information, such as earnings forecasts. The market applies a discount upon disclosure to capture the possibility that the revealed subjective expectation is too optimistic. While this discount is correct on average, it is too high (low) for a truly objective (overoptimistic) manager. Consequently, overoptimistic managers disclose more frequently, and their firms are overvalued. We show that higher levels of overoptimism or a greater fraction of overoptimistic managers amplify the market discount, which ultimately reduces overall disclosure in equilibrium.

Date: 2026
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https://doi.org/10.1111/jbfa.70059

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