Governance, Board Inattention, and the Appointment of Overconfident CEOs
47 Pages Posted: 25 Dec 2013 Last revised: 14 Feb 2018
Date Written: July 21, 2017
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. The results suggest that governance and board inattention can play a role, with overconfident executives being more likely to become CEO 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