Are Founder CEOs more Overconfident than Professional CEOs? Evidence from S&P 1500 Companies
36 Pages Posted: 17 Oct 2014 Last revised: 23 Oct 2015
Date Written: October 22, 2015
We provide evidence that founder CEOs of large S&P 1500 companies are more overconfident than their non-founder counterparts (“professional CEOs”). We approximate overconfidence via CEO tweets, CEO statements during earnings-conference calls, management-earnings forecasts, and CEO option-exercise behavior. Compared with professional CEOs, founder CEOs use more optimistic language on Twitter and during earnings-conference calls. In addition, founder CEOs are more likely to issue earnings forecasts that are too high; they are also more likely to perceive their firm to be undervalued as implied by their option-exercise behavior. To date, investors appear unaware of the “overconfidence bias” among founders.
Keywords: Overconfidence, Founder CEOs, Professional CEOs, Corporate Governance
JEL Classification: G30, L26, M12
Suggested Citation: Suggested Citation