Governance, Board Inattention, and the Appointment of Overconfident CEOs
Journal of Banking and Finance, Volume 113, 2020
Asian Finance Association (AsianFA) 2017 Conference
30th Australasian Finance and Banking Conference 2017
Stevens Institute of Technology School of Business Research Paper
69 Pages Posted: 25 Dec 2013 Last revised: 23 Mar 2020
Date Written: Octoberr 31, 2019
Abstract
Are overconfident executives more likely to be promoted to CEOs? Using an option-based overconfidence measure, we show that firms with overconfident executives tend to hire internally. Further, when firms hire internally, they are more likely to pick a more confident candidate. The results suggest that governance and board inattention can play a role, with overconfident executives being more likely to become CEOs in firms with entrenched and busy boards, suggesting that such boards might confuse luck-with-skill following the confident executives' tendencies towards greater risk-taking.
Keywords: Executive Overconfidence, CEO Turnover, New CEO Selection, Executive Tenure, Internal Appointment
JEL Classification: G32, G35
Suggested Citation: Suggested Citation