CEO Overconfidence and Management Forecasting

48 Pages Posted: 13 Sep 2006 Last revised: 14 Sep 2015

Paul Hribar

University of Iowa - Henry B. Tippie College of Business

Holly Yang

Singapore Management University - School of Accountancy

Date Written: March 1, 2015

Abstract

This paper examines how overconfidence affects the properties of management forecasts. Using both the ‘over-optimism’ and ‘miscalibration’ dimensions of overconfidence to generate our predictions, we examine three research questions. First, we examine whether overconfidence increases the likelihood of issuing a forecast. Second, we examine whether overconfidence increases the amount of optimism in management forecasts. Third, we examine whether overconfidence increases the precision of the forecast. Using both options- and press-based measures to proxy for individual overconfidence we find support for all three research questions.

Keywords: overconfidence, behavior biases, management forecasts, voluntary disclosure

JEL Classification: M41

Suggested Citation

Hribar, Paul and Yang, Holly, CEO Overconfidence and Management Forecasting (March 1, 2015). Contemporary Accounting Research, Forthcoming; Singapore Management University School of Accountancy Research Paper No. 2015-34. Available at SSRN: https://ssrn.com/abstract=929731 or http://dx.doi.org/10.2139/ssrn.929731

Paul Hribar (Contact Author)

University of Iowa - Henry B. Tippie College of Business ( email )

Dept. of Accounting
Iowa City, IA 52242-1000
United States
319-335-1008 (Phone)

Holly Yang

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore

HOME PAGE: http://sites.google.com/site/holly0417phd/

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