The informational role of overconfident CEOs

Author

Chi Shen WEI, Singapore Management UniversityFollow
Lei ZHANG, University of Queensland

Publication Type

Working Paper

Version

publishedVersion

Publication Date

8-2018

Abstract

We study how overconfident CEOs communicate with the market and whether this has implications on the firm’s information environment. Textual analysis reveals that overconfident CEOs communicate using less negative tone in their 10K/Q filings. Our evidence suggests that overconfident CEOs provide market participants with more value-relevant information as sell-side analysts make more accurate forecasts of their firm’s future earnings. Consistent with a reduction in asymmetric information, implied cost of equity capital is lower. However, not all investors benefit as the information advantage of short sellers disappears in the stocks of overconfident CEOs.

Keywords

Overconfident CEOs, Information Asymmetry, Cost of Capital, Short Interest

Discipline

Finance and Financial Management | Leadership Studies | Strategic Management Policy

Research Areas

Finance

First Page

1

Last Page

30

Embargo Period

11-5-2019

Citation

WEI, Chi Shen and ZHANG, Lei. The informational role of overconfident CEOs. (2018). 1-30.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6415

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://ssrn.com/abstract=2823716