Hirshleifer, David and Low, Angie and Teoh, Siew Hong (2010): Are Overconfident CEOs Better Innovators?
Download (155kB) | Preview
Using options- and press-based proxies for CEO overconfidence (Malmendier and Tate 2005a, 2005b, 2008), we find that over the 1993-2003 period, firms with overconfident CEOs have greater return volatility, invest more in innovation, obtain more patents and patent citations, and achieve greater innovative success for given research and development (R&D) expenditure. Overconfident managers only achieve greater innovation than non-overconfident managers in innovative industries. Overconfidence is not associated with lower sales, ROA, or Q.
|Item Type:||MPRA Paper|
|Original Title:||Are Overconfident CEOs Better Innovators?|
|Keywords:||CEO Overconfidence; Innovation; R&D; Patent|
|Subjects:||M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M5 - Personnel Economics > M52 - Compensation and Compensation Methods and Their Effects
G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General
M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M40 - General
|Depositing User:||Angie Low|
|Date Deposited:||03. May 2010 00:01|
|Last Modified:||30. Dec 2015 22:06|
Aghion, Philippe, John Van Reenen and Luigi Zingales, 2009, “Innovation and Institutional Ownership,” NBER Working Paper 14769.
Baker, Malcom, Xin Pan, and Jeffrey Wurgler, 2009, “A Reference Point Theory of Mergers and Acquisitions,” Working Paper, Harvard Business School and New York University.
Barber, Brad and Terrance Odean, 2001, “Boys will be Boys: Gender, Overconfidence, and Common Stock Investment,” Quarterly Journal of Economics 116(1), 261-292.
Ben-David, Itzhak, John Graham, and Campbell Harvey, 2007, “Managerial Overconfidence and Corporate Policies,” Working Paper, Duke University.
Benabou, Roland and Jean Tirole, 2002, “Self-Confidence and Personal Motivation,” Quarterly Journal of Economics 117, 871-915.
Bernardo, Antonio and Ivo Welch, 2001, “On the Evolution of Overconfidence and Entrepreneurs,” Journal of Economics and Management Strategy 10, 301-330.
Bertrand, Marianne and Antoinette Schoar, 2003, "Managing with Style: The Effect of Managers on Firm Policies," Quarterly Journal of Economics 118, 1169–1208.
Bettis, J.Carr, John Bizjak, and Michael Lemmon, 2005, “Exercise Behavior, Valuation, and the Incentive Effects of Employee Stock Options,” Journal of Financial Economics 76, 445-470.
Biais, Bruno, Denis Hilton, Karine Mazurier, and Sebastien Pouget, 2005, “Judgmental Overconfidence, Self-monitoring and Trading Performance in an Experimental Financial Market,” Review of Economic Studies 72, 287-312.
Billett, Matthew and Yiming Qian, 2008, “Are Overconfident CEOs Born or Made? Evidence of Self-Attribution Bias from Frequent Acquirers,” Management Science 54, 1037-1051.
Brenner, Lyle, Derek J. Koehler, Varda Liberman and Amos Tversky, 1996, “Overconfidence in Probability and Frequency Judgments: A Critical Examination,” Organizational Behavior and Human Decision Processes 65, 212-219.
Campbell, T. Colin, Shane Johnson, Jessica Rutherford, and Brooke Stanley, 2009, “CEO Confidence and Forced Turnover,” Working Paper, Texas A&M University.
Carpenter, Jennifer and Barbara Remmers, 2001, “Executive Stock Option Exercises and Inside Information,” Journal of Business, 74, 513–534.
Carpenter, Jennifer, Richard Stanton, and Nancy Wallace, 2009, “Estimation of Employee Stock Option Exercise Rates and Firm Cost,” Working Paper, University of California, Berkeley.
Carpenter, Jennifer, Richard Stanton, and Nancy Wallace, 2010, “Optimal Exercise of Executive Stock Options and Implications for Firm Cost,” Journal of Financial Economics Forthcoming.
Coles, Jeffrey, Naveen Daniel, and Lalitha Naveen, 2006, “Managerial Incentives and Risk-taking,” Journal of Financial Economics, 79, 431-468.
Core, John, and Wayne Guay, 2002, “Estimating the Value of Employee Stock Option Portfolios and their Sensitivities to Price and Volatility,” Journal of Accounting Research 40, 613–630
DeBondt, Werner and Richard Thaler, 1995, “Financial Decision Making in Markets and Firms: A Behavioral Perspective,” in R. Jarrow, V Maksimovic, and W Ziemba, eds, Finance, Handbooks in Operations Research and Management Science, Amsterdam: Elsevier-North Holland.
Einhorn, Hillel, 1980, “Overconfidence in Judgment,” New Directions for Methodology of Social and Behavioral Science 4, 1-16.
Galasso, Alberto and Timothy Simcoe, 2010, “CEO Overconfidence and Innovation,” Working Paper, Boston University.
Gervais, Simon, J. B. Heaton, and Terrance Odean, 2009, “Overconfidence, Compensation Contracts, and Labor Markets,” Working Paper, Duke University.
Gigerenzer Gerd, Hoffrage Ulrich, and Heinz Kleinbölting 1991, “Probabilistic Mental Models: A Brunswikian Theory of Confidence,” Psychological Review 98, 506-528.
Goel, Anand, and Anjan Thakor, 2008, “Overconfidence, CEO Selection, and Corporate Governance,” Journal of Finance 63, 2737-2784.
Graham, John, Campbell Harvey, and Manju Puri, 2009, “Managerial Attitudes and Corporate Actions,” Working Paper, Duke University.
Griffin, Dale, and Amos Tversky, 1992, “The Weighing of Evidence and the Determinants of Confidence,” Cognitive Psychology 24, 411–435.
Griliches, Zvi, Ariel Pakes, and Bronwyn Hall, 1987, “The Value of Patents as Indicators of Inventive Activity,” in P. Dasgupta and P. Stoneman, eds., Economic Policy and Technological Performance, Cambridge England: Cambridge University Press.
Hall, Bronwyn, Adam Jaffe, and Manuel Trajtenberg, 2001, “The NBER Patent Citations Data File: Lessons, Insights and Methodological Tools,” NBER Working Paper 8498.
Hall, Bronwyn, Adam Jaffe, and Manuel Trajtenberg, 2005, “Market Value and Patent Citations,” RAND Journal of Economics 36, 16-38.
Hall, Bronwyn and Rosemarie Ziedonis, 2001, “The Patent Paradox Revisited: An Empirical Study of Patenting in the U.S. Semiconductor Industry, 1979–1995,” RAND Journal of Economics 32, 101-128.
Hribar, Paul and Holly Yang, 2010, “Does CEO Overconfidence Affect Management Forecasting and Subsequent Earnings Management?” Working Paper, University of Iowa.
Kaplan, Steven, and Bernadette Minton, 2008, “How Has CEO Turnover Changed?” Working Paper, Ohio State University.
Klayman, Joshua and R.S. Burt, 1998, “Individual Differences in Confidence and Experiences in Social Networks,” Working Paper, University of Chicago.
Klayman, Joshua, Jack Soll, Claudia González-Vallejo and Sema Barlas, 1999, “Overconfidence: It Depends on How, What, and Whom You Ask,” Organizational Behavior and Human Decision Processes 79, 216-247.
Koellinger, Philipp, Maria Minniti and Christian Schade, 2007, “ ‘I Think I Can, I Think I Can’: Overconfidence and Entrepreneurial Behavior,” Journal of Economic Psychology 28, 502-527.
Koontz, Harold and Heinz Weihrich, 2007, Essentials of Management: An International Perspective, New Delhi: Tata McGraw-Hill.
Lee, J. W., J. F. Yates, H. Shinotsuka, N.S. Yen, R. Singh, M. L. U. Onglatco, M. Gupta and D. Bhatnagar, 1995, “Cross-national Differences in Overconfidence,” Asian Journal of Psychology 1, 63–69.
Liu, Yue, and Richard Taffler, 2008. “CEO Overconfidence in M&A Decision Making and its Impact on Firm Performance,” Working Paper, University of Edinburgh.
Low, Angie, 2009, “Managerial Risk-Taking Behavior and Equity-Based Compensation,” Journal of Financial Economics 92, 470-490.
Malmendier, Ulrike and Geoffrey Tate, 2005a. “CEO Overconfidence and Corporate Investment,” Journal of Finance 60, 2661-2700.
Malmendier, Ulrike and Geoffrey Tate, 2005b. “Does Overconfidence Affect Corporate Investment? CEO Overconfidence Measures Revisited,” European Financial Management, November 11, 649–659.
Malmendier, Ulrike and Geoffrey Tate, 2008, “Who Makes Acquisitions? CEO Overconfidence and the Market's Reaction,” Journal of Financial Economics 89, 20-43.
Malmendier, Ulrike, Geoffrey Tate, and Jon Yan, 2010, “Managerial Beliefs and Corporate Financial Policies,” Working Paper, University of California, Berkeley.
Mergenthaler, Richard, Shivaram Rajgopal, and Suraj Srinivasan, 2009, “CEO and CFO Career Penalties to Missing Quarterly Analysts Forecasts,” Working Paper, University of Iowa.
Opler, Tim, Lee Pinkowitz, René Stulz, and Rohan Williamson, 1999, “The Determinants and Implications of Corporate Cash Holdings,” Journal of Financial Economics 52, 3-46.
Oskamp, Stuart, 1965, “Overconfidence in Case Study Judgments,” Journal of Consulting Psychology 29, 261-265.
Puri, Manju and David Robinson, 2007, “Optimism and Economic Choice,” Journal of Financial Economics 86, 71-99.
Rabin, Matthew, 1998, “Psychology and Economics.” Journal of Economic Literature 36, 11–46.
Russo, J. Edward and Paul Schoemaker, 1992, “Managing Overconfidence,” Sloan Management Review 33, 7-17.
Schrand, Catherine and Sarah Zechman, 2010, “Executive Overconfidence and the Slippery Slope to Fraud,” Working Paper, University of Chicago.
Trajtenberg, Manuel, 1990, “A Penny for Your Quotes: Patent Citations and the Value of Innovations,” RAND Journal of Economics 21, 172-187.
Wagenaar, Willem and Gideon Keren, 1986, “Does the Expert Know? The Reliability of Predictions and Confidence Ratings of Experts,” In E. Hollnagel, G. Mancini, and D. Woods, eds Intelligent Decision Support in Process Environment, Berlin: Springer.
Weinstein, Neil, 1980, “Unrealistic Optimism about Future Life Events,” Journal of Personality and Social Psychology 39, 806-820.