The bright side of managerial over-optimism

Gilles Hilary, Charles Hsu, Benjamin Segal and Rencheng Wang

Journal of Accounting and Economics, 2016, vol. 62, issue 1, 46-64

Abstract: Human estimation and inference are subject to systematic biases such as overconfidence and over-optimism. In contrast to prior research that has identified multiple negative consequences of these biases, we focus on positive effects. We empirically examine a setting in which over-optimism a) is a related but different bias from overconfidence, b) emerges dynamically in a rational economic framework, and c) generates higher managerial effort. Importantly, this additional effort improves firm profitability and market value.

Keywords: Over-optimism; Managerial effort; Firm performance (search for similar items in EconPapers)
JEL-codes: G30 G39 M41 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:62:y:2016:i:1:p:46-64

DOI: 10.1016/j.jacceco.2016.04.001

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