Abstract

https://ssrn.com/abstract=2371435
 


 



Top Dogs: Overconfident Executives and New CEO Selection


Suman Banerjee


Stevens Institute of Technology

Lili Dai


Australian National University (ANU)

Mark Humphery-Jenner


UNSW Business School; Financial Research Network (FIRN)

Vikram K. Nanda


University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics

July 18, 2015


Abstract:     
Are overconfident executives more likely to be promoted to CEO? 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. We propose, and test between two hypotheses, matching and board-failure, for favoring overconfident executives. We find support for the matching hypothesis. Specifically, firms that are candidates for a change in strategy (i.e., large and low-risk firms) tend to appoint overconfident-executives, and benefit in terms of improved corporate value and innovative efficiency.

Number of Pages in PDF File: 59

Keywords: Executive Overconfidence, CEO Turnover, New CEO Selection, Executive Tenure, Internal Appointment

JEL Classification: G32, G35


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Date posted: December 25, 2013 ; Last revised: August 20, 2015

Suggested Citation

Banerjee, Suman and Dai, Lili and Humphery-Jenner, Mark and Nanda, Vikram K., Top Dogs: Overconfident Executives and New CEO Selection (July 18, 2015). Available at SSRN: https://ssrn.com/abstract=2371435 or http://dx.doi.org/10.2139/ssrn.2371435

Contact Information

Suman Banerjee
Stevens Institute of Technology ( email )
525 River Street
Hoboken, NJ 07030
United States
2012613689 (Phone)
Lili Dai
Australian National University (ANU) ( email )
Canberra, Australian Capital Territory 2601
Australia
Mark Humphery-Jenner (Contact Author)
UNSW Business School ( email )
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

Vikram K. Nanda
University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics ( email )
2601 North Floyd Road
P.O. Box 830688
Richardson, TX 75083
United States
Feedback to SSRN


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