I Am The Firm! Eponymous Firms and Rose-Coloured Forecasts

39 Pages Posted: 18 Feb 2021 Last revised: 25 Aug 2022

See all articles by Doron Kliger

Doron Kliger

University of Haifa

Yevgeny Mugerman

Bar Ilan University

Ruth Rooz

Hebrew University

Date Written: August 24, 2022

Abstract

We invoke the famous Louis XIV quote “L'État, c'est moi,” applying it to the corporate world, and introduce the novel idea that a self-serving bias, which we define as “I Am The Firm,” is infused within the culture of certain companies. We hypothesize that the owners of eponymous firms – firms that bear the names of their owners – experience enhanced self-identification with their firms, and thus tend to inject their own subjective beliefs and desires into the realistic objective prospects of the firms. The “I am the firm” effect is a form of a self-serving bias, which arises from the blurring of boundaries between the owner and the corporate eponymy entity that carries the same name. Employing a unique corporate setting in Israel, we demonstrate that eponymous firms disclose unduly optimistic biased forecasts relative to their non-eponymous counterparts, which cannot be validated or justified solely by rational explanations.

Keywords: management forecasts; cash flow forecasts; behavioral biases; eponymous firms; family ownership

Suggested Citation

Kliger, Doron and Mugerman, Yevgeny and Rooz, Ruth, I Am The Firm! Eponymous Firms and Rose-Coloured Forecasts (August 24, 2022). Available at SSRN: https://ssrn.com/abstract=3755887 or http://dx.doi.org/10.2139/ssrn.3755887

Doron Kliger

University of Haifa ( email )

Haifa 31905
Israel
(972)4-8249587 (Phone)
(972)4-8240059 (Fax)

Yevgeny Mugerman (Contact Author)

Bar Ilan University ( email )

Ramat Gan
5290002
Israel

Ruth Rooz

Hebrew University ( email )

Jerusalem
Israel
0547802992 (Phone)
9 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
135
Abstract Views
892
Rank
418,495
PlumX Metrics