Terrorist attacks and corporate investment: The beneficial value of CEO overconfidence

Hyeong Joon Kim and Seongjae Mun

International Review of Financial Analysis, 2022, vol. 84, issue C

Abstract: This study examines whether terrorist attacks influence corporate investments and firm value. We expect that overconfident CEOs can mitigate the underinvestment problem caused by terrorist attacks because they overestimate the returns on investment. Using measures of terrorist attack proximity in the U.S., we find that firms with non-overconfident CEOs significantly decrease their investment growth when terrorist attacks affect them, while firms with overconfident CEOs do not. Consequently, the impact of terrorist attacks on firm value varies between firms with overconfident and non-overconfident CEOs. Overall, this study suggests that CEO overconfidence can benefit shareholder value under certain conditions, such as terrorist attacks.

Keywords: Terrorist attacks; Corporate investment; Underinvestment problem; CEO overconfidence; Firm value (search for similar items in EconPapers)
JEL-codes: D81 G39 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:84:y:2022:i:c:s1057521922003131

DOI: 10.1016/j.irfa.2022.102363

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