Abstract
We predict how the effect of CEO optimism on firm value varies across firms and model how industry competition impacts the relation between CEO optimism and firm value. Estimating optimism from option-exercise behaviour, we find that CEO optimism increases firm value by about 17% on average. Consistent with theoretical predictions, CEO optimism is more value-enhancing in firms that are riskier, engage in greater innovation and investment, have more internal resources and operate in industries that are more competitive or have a larger fraction of optimistic CEOs. Various endogeneity checks support a causal impact of CEO optimism on firm value.
| Original language | English |
|---|---|
| Journal | European Financial Management |
| DOIs | |
| State | Accepted/In press - 2025 |
Keywords
- CEO
- Firm value
- Optimism
- Overconfidence