The Bright Side of Managerial Over-Optimism
50 Pages Posted: 29 Jun 2013 Last revised: 25 Feb 2017
Date Written: July 6, 2014
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, firm performance
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