CEO Overconfidence and Corporate Investment
CEO Overconfidence and Corporate Investment
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DOI:
10.2139/ssrn.354387
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发表时间:
2002-10
期刊:
影响因子:
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通讯作者:
Ulrike Malmendier;Geoffrey Tate
中科院分区:
文献类型:
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作者:
Ulrike Malmendier;Geoffrey Tate
We argue that managerial overconfidence can account for corporate investment distortions. Overconfident managers overestimate the returns to their investment projects and view external funds as unduly costly. Thus, they overinvest when they have abundant internal funds, but curtail investment when they require external financing. We test the overconfidence hypothesis, using panel data on personal portfolio and corporate investment decisions of Forbes 500 CEOs. We classify CEOs as overconfident if they persistently fail to reduce their personal exposure to company-specific risk. We find that investment of overconfident CEOs is significantly more responsive to cash flow, particularly in equity-dependent firms.