Self-attribution of overconfident CEOs and asymmetric investment-cash flow sensitivity
Paul Moon Sub Choi,
Chune Young Chung and
The North American Journal of Economics and Finance, 2018, vol. 46, issue C, 1-14
In this paper, we examine whether overconfidence coupled with a self-attribution bias affects the investment decisions of top corporate managers. First, overconfidence of chief executive officers appears to lead to the downward rigidity of investment-cash flow sensitivity. Additionally, overconfidence intensified by managerial self-attribution exacerbates the stickiness of investment-cash flow sensitivity. These results hold in both financially unconstrained and constrained firms with stronger results in the former. Overall, our findings are in line with the literature that lends support to the excessive investment commitment of overconfident managers.
Keywords: Investment-cash flow sensitivity; Overconfidence; Self-attribution bias (search for similar items in EconPapers)
JEL-codes: G02 G31 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:46:y:2018:i:c:p:1-14
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