Overconfident CEOs in Dire Straits: How Incumbent and Successor CEOs’ Overconfidence Affects Firm Turnaround Performance

Marc Kowalzick, Jan‐Philipp Ahrens, Jochim G. Lauterbach and Yi Tang

Journal of Management Studies, 2024, vol. 61, issue 5, 1985-2032

Abstract: As a well‐studied executive bias, CEO overconfidence usually has negative connotations – although empirical evidence of its performance effects remains inconclusive. By theorizing on CEO overconfidence in a turnaround situation, we propose that CEO overconfidence can either help or hinder turnaround performance, depending on whether the overconfident CEO is the incumbent who steered the firm into dire straits, or a successor hired during decline. Our empirical findings suggest that overconfidence in an incumbent CEO damages turnaround performance; replacing overconfident incumbents improves turnaround performance and overconfident successors hired during decline enhance turnaround performance. Exploratory post‐hoc analyses further suggest that these effects are driven by the divergent ways in which overconfidence biases incumbent and successor CEOs’ assessment of organizational decline. Comprehensive implications for research and practice on CEO overconfidence are discussed.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/joms.12962

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jomstd:v:61:y:2024:i:5:p:1985-2032

Ordering information: This journal article can be ordered from
http://www.blackwell ... s.asp?ref=00022-2380

Access Statistics for this article

Journal of Management Studies is currently edited by Timothy Clark, Steven W. Floyd and Mike Wright

More articles in Journal of Management Studies from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().