47 Pages Posted: 25 Dec 2013 Last revised: 7 Aug 2017
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
Banerjee, Suman and Dai, Lili and Humphery-Jenner, Mark and Nanda, Vikram K., Governance, Board Inattention, and the Appointment of Overconfident CEOs (July 21, 2017). Asian Finance Association (AsianFA) 2017 Conference. Available at SSRN: https://ssrn.com/abstract=2371435 or http://dx.doi.org/10.2139/ssrn.2371435