Publication Type

Journal Article

Version

submittedVersion

Publication Date

12-2018

Abstract

Overconfident CEOs/senior executives tend to have excessively positive views of their own skills and their company’s future performance. We hypothesize that overconfident managers are more likely to engage in reckless or intentional actions/disclosures that give rise to securities class actions (SCAs). Empirical evidence is supportive: Overconfident CEOs/senior executives increase SCA likelihood, though litigation risk is ameliorated through improved governance, such as following the Sarbanes–Oxley Act of 2002. Post-SCA, companies are less likely to hire an overconfident CEO. Following an SCA, overconfident CEOs appear to moderate behavior and to reduce their litigation risk.

Keywords

CEO Overconfidence, Team Overconfidence, Securities Class Actions, Governance

Discipline

Finance | Finance and Financial Management

Research Areas

Finance

Publication

Journal of Financial and Quantitative Analysis

Volume

53

Issue

6

First Page

2685

Last Page

2719

ISSN

0022-1090

Identifier

10.1017/S0022109018001291

Publisher

Cambridge University Press (CUP): HSS Journals

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1017/S0022109018001291

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