Are overconfident CEOs better leaders? Evidence from stakeholder commitments
T. Mandy Tham and
Journal of Financial Economics, 2018, vol. 127, issue 3, 519-545
We find evidence that the leadership of overconfident chief executive officers (CEOs) induces stakeholders to take actions that contribute to the leader's vision. By being intentionally overexposed to the idiosyncratic risk of their firms, overconfident CEOs exhibit a strong belief in their firms’ prospects. This belief attracts suppliers beyond the firm's observable expansionary corporate activities. Overconfident CEOs induce more supplier commitments including greater relationship-specific investment and longer relationship duration. Overconfident CEOs also induce stronger labor commitments as employees exhibit lower turnover rates and greater ownership of company stock in benefit plans.
Keywords: CEO overconfidence; Leadership; Customer-supplier; Employee ownership (search for similar items in EconPapers)
JEL-codes: G32 J53 J54 L14 L22 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:127:y:2018:i:3:p:519-545
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