Fusing Identities: The 'I Am the Firm' Phenomenon in Eponymous Enterprises

Abstract

In this study, we examine the psychological phenomenon of self-identification with firms, encapsulated in the maxim "I Am The Firm," a self-serving bias prevalent in eponymous firms. Drawing upon Louis XIV's assertion "L'État, c'est moi," we investigate how this deep personal identification influences managerial forecasts, leading to a tendency among owners to project overly optimistic financial outlooks. This effect represents a unique blend of behavioral finance and corporate identity, where the boundaries between personal and corporate identities blur. Utilizing a novel dataset from Israel, where a regulatory framework provides a unique vantage for assessing forecast bias, we demonstrate that eponymous firms consistently issue more optimistic forecasts than their non-eponymous counterparts. We further validate our findings through comparative analysis with management forecasts from European firms. This research fills a critical gap in understanding how owner identity can skew corporate financial forecasts, offering significant implications for behavioral finance and corporate governance.

Keywords: management forecasts, cash flow forecasts, behavioral bias, eponymous firms, family ownership.