The Bright Side of Managerial Over-Optimism

50 Pages Posted: 29 Jun 2013 Last revised: 25 Feb 2017

See all articles by Gilles Hilary

Gilles Hilary

Georgetown University - Department of Accounting and Business Law

Charles Hsu

Hong Kong University of Science & Technology

Benjamin Segal

Fordham University; Hebrew University of Jerusalem

Rencheng Wang

The University of Melbourne

Date Written: July 6, 2014

Abstract

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

Suggested Citation

Hilary, Gilles and Hsu, Charles and Segal, Benjamin and Wang, Rencheng, The Bright Side of Managerial Over-Optimism (July 6, 2014). Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2286226 or http://dx.doi.org/10.2139/ssrn.2286226

Gilles Hilary (Contact Author)

Georgetown University - Department of Accounting and Business Law ( email )

McDonough School of Business
Washington, DC 20057
United States

Charles Hsu

Hong Kong University of Science & Technology ( email )

Hong Kong
Hong Kong
852-2358-7568 (Phone)
852-2358-1693 (Fax)

Benjamin Segal

Fordham University ( email )

113 West 60th Street
New York, NY 10023
United States

Hebrew University of Jerusalem

Rencheng Wang

The University of Melbourne ( email )

Victoria
Melbourne, Victoria 3010 3010
Australia

Register to save articles to
your library

Register

Paper statistics

Downloads
551
rank
46,626
Abstract Views
2,305
PlumX Metrics