Governance, board inattention, and the appointment of overconfident CEOs

Suman Banerjee, Lili Dai, Mark Humphery-Jenner, Vikram Nanda

Research output: Contribution to journalArticlepeer-review

14 Scopus citations

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.

Original languageEnglish
Article number105733
JournalJournal of Banking and Finance
Volume113
DOIs
StatePublished - Apr 2020

Keywords

  • Boards
  • CEO turnover
  • Executive overconfidence
  • Executive tenure
  • Governance
  • Information asymmetry
  • Internal appointment
  • New CEO selection

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