Rose- and Blue-Colored Glasses: Childhood Exposure to Political Ideology and CEO Overconfidence

Abstract

Does who makes government policy matter to CEOs? Using data on the birthplace of US CEOs, I show that CEOs who were born in blue (Democrat) states display overconfidence when there is a Democratic president, whereas CEOs who were born in red (Republican) states display overconfidence when there is a Republican president. The effect is strongest when the CEO grew up during a time of high state-level economic growth suggesting the CEO forms a positive association between the party and the party's stewardship of the economy. Surprisingly, however, there is no evidence that CEOs' personal political beliefs predict overconfidence.

Keywords: CEO Political Ideology, Investment, Overconfidence

JEL Classification: G31, G38, G40, H32