Publication Type

Journal Article

Publication Date

12-2017

Abstract

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 ownerhsip

Discipline

Corporate Finance | Finance and Financial Management

Research Areas

Finance

Publication

Journal of Financial Economics

ISSN

0304-405X

Identifier

10.1016/j.jfineco.2017.12.008

Publisher

Elsevier

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

https://doi.org/10.1016/j.jfineco.2017.12.008

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