All Is Not Lost that Is Delayed: Overconfidence and Investment Outcomes

Review of Managerial Science, Forthcoming

41 Pages Posted: 6 Jan 2017 Last revised: 4 Aug 2022

See all articles by André Betzer

André Betzer

University of Wuppertal - Schumpeter School of Business and Economics

Inga van den Bongard

University of Mannheim - Finance Area

Felix W. Schweder

affiliation not provided to SSRN

Erik Theissen

University of Mannheim - Finance Area

Christine Volkmann

University of Wuppertal

Date Written: August 18, 2019

Abstract

We use a unique panel data set of private German firms to analyze the relation between managerial overconfidence and investment policy in small and medium-sized firms. We find that overconfident managers invest more, and that this relation is driven by expansion investments. When considering the outcome of investment projects, we find that projects initiated by overconfident managers are less likely to be completed as planned. When we differentiate between three types of non-completion (downsizing, delaying, and abandoning), we find that overconfident managers are more likely to delay, rather than to abandon or downsize a project.

Keywords: Overconfidence, Small and medium-sized enterprises, corporate investment, private companies

JEL Classification: G31, G32, O16

Suggested Citation

Betzer, André and van den Bongard, Inga and Schweder, Felix W. and Theissen, Erik and Volkmann, Christine, All Is Not Lost that Is Delayed: Overconfidence and Investment Outcomes (August 18, 2019). Review of Managerial Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2893548 or http://dx.doi.org/10.2139/ssrn.2893548

André Betzer (Contact Author)

University of Wuppertal - Schumpeter School of Business and Economics ( email )

Gaußstraße 20
Wuppertal
Germany

HOME PAGE: http://finance.uni-wuppertal.de/index.php?id=1153

Inga Van den Bongard

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

Felix W. Schweder

affiliation not provided to SSRN

Erik Theissen

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

Christine Volkmann

University of Wuppertal ( email )

Gaußstraße 20
42097 Wuppertal
Germany

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