Abstract

http://ssrn.com/abstract=929731
 
 

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CEO Overconfidence and Management Forecasting


Paul Hribar


University of Iowa - Henry B. Tippie College of Business

Holly Yang


Singapore Management University - School of Accountancy

June 2013


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.

Number of Pages in PDF File: 61

Keywords: overconfidence, voluntary forecast, earnings management

JEL Classification: G30, M41, M43, M45

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Date posted: September 13, 2006 ; Last revised: June 11, 2014

Suggested Citation

Hribar, Paul and Yang, Holly, CEO Overconfidence and Management Forecasting (June 2013). Available at SSRN: http://ssrn.com/abstract=929731 or http://dx.doi.org/10.2139/ssrn.929731

Contact Information

Paul Hribar (Contact Author)
University of Iowa - Henry B. Tippie College of Business ( email )
Dept. of Accounting
Iowa City, IA 52242-1000
United States
319-335-1008 (Phone)
Holly Yang
Singapore Management University - School of Accountancy ( email )
60 Stamford Road
Singapore 178900
Singapore

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