CEO Overconfidence and Management Forecasting

Author

Paul HRIBAR, University of Iowa
Holly I. YANG, Singapore Management UniversityFollow

Publication Type

Journal Article

Version

submittedVersion

Publication Date

3-2016

Abstract

This paper examines how overconfidence affects the properties of management forecasts. Using both the ‘over‐optimism’ and ‘miscalibration’ effects of overconfidence to generate our predictions, we examine three research questions. First, we examine whether overconfidence increases the likelihood of issuing a forecast. Second, we examine whether overconfidence increases the amount of optimism in management forecasts. Third, we examine whether overconfidence increases the specificity and precision of the forecast. We use both options‐ and press‐based measures to proxy for individual overconfidence, and find support for all three research questions. We further find that the results are concentrated among firms that provide forecasts sporadically, consistent with overconfidence playing a stronger role when managers have more flexibility in determining forecast properties.

Keywords

overconfidence, voluntary forecast, earnings management

Discipline

Accounting | Corporate Finance | Human Resources Management

Research Areas

Corporate Reporting and Disclosure

Publication

Contemporary Accounting Research

Volume

33

Issue

1

First Page

204

Last Page

227

ISSN

0823-9150

Identifier

10.1111/1911-3846.12144

Publisher

Canadian Academic Accounting Association

Citation

HRIBAR, Paul and YANG, Holly I.. CEO Overconfidence and Management Forecasting. (2016). Contemporary Accounting Research. 33, (1), 204-227.
Available at: https://ink.library.smu.edu.sg/soa_research/1161

Copyright Owner and License

Authors

Creative Commons License

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

Additional URL

https://doi.org/10.1111/1911-3846.12144