The bright side of managerial over-optimism

Publication Type

Journal Article

Publication Date

8-2016

Abstract

Human estimation and inference are subject to systematic biases such as overconfidence and over-optimism. In contrast to prior research that has identified multiple negative consequences of these biases, we focus on positive effects. We empirically examine a setting in which over-optimism a) is a related but different bias from overconfidence, b) emerges dynamically in a rational economic framework, and c) generates higher managerial effort. Importantly, this additional effort improves firm profitability and market value.

Keywords

Over-optimism, Managerial effort, Firm performance

Discipline

Accounting

Research Areas

Corporate Governance, Auditing and Risk Management

Publication

Journal of Accounting and Economics

Volume

62

Issue

1

First Page

46

Last Page

64

ISSN

0165-4101

Identifier

10.1016/j.jacceco.2016.04.001

Publisher

Elsevier: 24 months

Additional URL

https://doi.org/10.1016/j.jacceco.2016.04.001

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