The impact of overconfident customers on supplier firm risks

Yiwei Fang, Iftekhar Hasan, Chih-Yung Lin and Jiong Sun

Journal of Economic Behavior & Organization, 2022, vol. 197, issue C, 115-133

Abstract: Research has shown that firms with overconfident chief executive officers (CEOs) tend to overinvest and are exposed to high risks due to unrealistically optimistic estimates of their firms’ future performance. This study finds evidence that overconfident CEOs also affect suppliers’ risk taking. Specifically, serving overconfident customers can lead to high supplier risks, measured by stock volatility, idiosyncratic risk, and market risk. The effects are pronounced when customers aggressively invest in research and development (R&D). Our results are robust after addressing self-selection bias and using different CEO overconfidence measures. We also document some real effects of customer CEO overconfidence on suppliers.

Keywords: CEO overconfidence; Supply chain; firm risk (search for similar items in EconPapers)
JEL-codes: D2 G3 M1 P4 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:197:y:2022:i:c:p:115-133

DOI: 10.1016/j.jebo.2022.01.005

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