Leadership, Coordination and Mission-Driven Management
Columbia Business School - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
Markus K. Brunnermeier
Princeton University - Department of Economics
New York University - Stern School of Business; National Bureau of Economic Research (NBER)
March 14, 2008
AFA 2009 San Francisco Meetings Paper
What makes a good leader? A good leader is able to coordinate his followers around a credible mission statement, which communicates the future course of action of the organization. In practice, leaders learn about the best course of action for the organization over time. While learning helps improve the organization's goals it also creates a time-consistency problem. Leader overconfidence is a valuable attribute in such a setting, since it slows down the leader's learning and thus improves the credibility of the mission statement. But overconfident leaders also inhibit communication with followers and leader overconfidence is costly when followers have sufficiently valuable signals.
Number of Pages in PDF File: 44
Keywords: leadership, CEO overconfidence, coordination games
JEL Classification: G3, C7
Date posted: March 17, 2008
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