Governance, board inattention, and the appointment of overconfident CEOs

Suman Banerjee, Lili Dai, Mark Humphery-Jenner and Vikram Nanda

Journal of Banking & Finance, 2020, vol. 113, issue C

Abstract: Are overconfident executives more likely to be promoted to CEOs? Using an option-based overconfidence measure, we show that firms with overconfident executives tend to hire internally. Further, when firms hire internally, they are more likely to pick a more confident candidate. The results suggest that governance and board inattention can play a role, with overconfident executives being more likely to become CEOs in firms with entrenched and busy boards, suggesting that such boards might confuse luck-with-skill following the confident executives’ tendencies towards greater risk-taking.

Keywords: Executive overconfidence; CEO turnover; New CEO selection; Executive tenure; Internal appointment; Governance; Boards; Information asymmetry (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:113:y:2020:i:c:s0378426619303061

DOI: 10.1016/j.jbankfin.2019.105733

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