Are Founder CEOs more Overconfident than Professional CEOs? Evidence from S&P 1500 Companies

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

Lee, Joon Mahn and Hwang, Byoung-Hyoun and Chen, Hailiang, Are Founder CEOs more Overconfident than Professional CEOs? Evidence from S&P 1500 Companies (October 22, 2015). Available at SSRN: https://ssrn.com/abstract=2510549 or http://dx.doi.org/10.2139/ssrn.2510549