TY - JOUR
T1 - Governance, board inattention, and the appointment of overconfident CEOs
AU - Banerjee, Suman
AU - Dai, Lili
AU - Humphery-Jenner, Mark
AU - Nanda, Vikram
N1 - Publisher Copyright:
© 2019
PY - 2020/4
Y1 - 2020/4
N2 - 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.
AB - 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.
KW - Boards
KW - CEO turnover
KW - Executive overconfidence
KW - Executive tenure
KW - Governance
KW - Information asymmetry
KW - Internal appointment
KW - New CEO selection
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U2 - 10.1016/j.jbankfin.2019.105733
DO - 10.1016/j.jbankfin.2019.105733
M3 - Article
AN - SCOPUS:85078937427
SN - 0378-4266
VL - 113
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
M1 - 105733
ER -