Determinants of corporate financial distress: A CEO overconfidence perspective

This study uses data from the United States from 1980 to 1994 to explore the relationship between CEO overconfidence and corporate financial distress during the "CEO Overconfidence Paradigm Era." By using CEOs' private portfolios and press coverage as proxies for overconfidence, this study examines whether CEO overconfidence contributes to corporate financial distress. The analysis indicates that CEOs characterized by optimism tend to make biased investment decisions, ultimately leading to decreased shareholder wealth. Fascinatingly, the results reveal a counterintuitive finding: CEOs publicly mentioned in the Wall Street Journal for their overconfidence exhibit a lower risk of financial distress for their companies.

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Publication Details

Journal
Applied Economics
Published
2024-08-08
DOI
https://doi.org/10.1080/00036846.2024.2386850
Citations
2
Primary Topic
Corporate Finance and Governance
Type
article
Field-Weighted Citation Impact
1.89
Controls
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article

Determinants of corporate financial distress: A CEO overconfidence perspective

C.-Y. Ho
2 citations
Applied Economics
Corporate Finance and Governance
1.89
article

Determinants of corporate financial distress: A CEO overconfidence perspective

C.-Y. Ho
article en
2 citations

Abstract

This study uses data from the United States from 1980 to 1994 to explore the relationship between CEO overconfidence and corporate financial distress during the "CEO Overconfidence Paradigm Era." By using CEOs' private portfolios and press coverage as proxies for overconfidence, this study examines whether CEO overconfidence contributes to corporate financial distress. The analysis indicates that CEOs characterized by optimism tend to make biased investment decisions, ultimately leading to decreased shareholder wealth. Fascinatingly, the results reveal a counterintuitive finding: CEOs publicly mentioned in the Wall Street Journal for their overconfidence exhibit a lower risk of financial distress for their companies.

Applied EconomicsVol. 57(42)
National Taiwan University of Science and Technology (TW)
Openalex Percentile: Top 12%
Corporate Finance and Governance
1.89
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