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Journal of Banking & Finance Vol. 113 2020

Governance, board inattention, and the appointment of overconfident CEOs

Suman Banerjee1; Lili Dai2; Mark Humphery-Jenner; Vikram Nanda3

1 Stevens Institute of Technology · 2 UNSW Sydney · 3 The University of Texas at Dallas

open access

Abstract

Are overconfident executives more likely to be promoted to CEOs? Using an option-based overconfidence measure, we show that firms with overconfident executives tend to hire internally. Further, when firms hire internally, they are more likely to pick a more confident candidate. The results suggest that governance and board inattention can play a role, with overconfident executives being more likely to become CEOs in firms with entrenched and busy boards, suggesting that such boards might confuse luck-with-skill following the confident executives’ tendencies towards greater risk-taking.

DOI
10.1016/j.jbankfin.2019.105733
Volume
113
Pages
105733
Language
en
Sources
openalex crossref bibtex:phds-export.bib

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