All is not lost that is delayed: overconfidence and investment outcomes

André Betzer (), Inga Bongard (), Felix Schweder (), Erik Theissen () and Christine Volkmann ()
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André Betzer: Bergische Universität Wuppertal – Schumpeter School of Business and Economics
Inga Bongard: University of Mannheim
Felix Schweder: Bergische Universität Wuppertal – Schumpeter School of Business and Economics
Erik Theissen: University of Mannheim
Christine Volkmann: Bergische Universität Wuppertal – Schumpeter School of Business and Economics

Review of Managerial Science, 2023, vol. 17, issue 7, No 4, 2297-2324

Abstract: Abstract We use a unique panel data set of private German firms to analyze the relation between managerial overconfidence and investment policy in small and medium-sized firms. We find that overconfident managers invest more, and that this relation is driven by expansion investments. When considering the outcome of investment projects, we find that projects initiated by overconfident managers are less likely to be completed as planned. When we differentiate between three types of non-completion (downsizing, delaying, and abandoning), we find that overconfident managers are more likely to delay, rather than to abandon or downsize a project.

Keywords: Overconfidence; Small and medium-sized enterprises; Corporate investment; Private companies (search for similar items in EconPapers)
JEL-codes: G31 G32 O16 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11846-022-00578-w

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