Download or read book The Bright Side of Overconfidence an Empirical Investigation of the Implications of CEO Overconfidence in SMEs written by Irina Karthaus and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Overconfidence Review of its Economic Implications written by Stefan Dietrich and published by GRIN Verlag. This book was released on 2018-05-02 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: Essay from the year 2017 in the subject Psychology - Work, Business, Organisation, grade: 1,00, University of Mannheim, course: Behavioral Economics Seminar, language: English, abstract: Overconfidence is believed to be one of the most widespread behavioral biases. Empirical evidence supports this argument in many instances and differentiates between various forms and manifestations. Whether this is in sum economically negative for the individual or society remains unanswered in the literature. I analyze the economic implications of overconfidence based on recent research and connects them to reasons and viable solutions to overcome this bias in certain areas of the economic realm: consumer choices, market entry and decision making of firms, financial markets and bubbles.

Download or read book Managerial Overconfidence Different Thinking through Different Education written by Maximilian Margolin and published by Anchor Academic Publishing (aap_verlag). This book was released on 2014-02-01 with total page 82 pages. Available in PDF, EPUB and Kindle. Book excerpt: In literature, overconfidence has been blamed for economic bubbles and crises as well as for international conflicts and wars. While education has already been shown to impact one’s level of overconfidence previous research focused on the length and profoundness of education. This study, in contrast, examines the connection between overconfidence and the field in which a person has been educated. The issues covered are therefore how education and mind set are related, why a differentiation between “quantitative” and “qualitative” education makes sense in this context, and how different mind-sets influence an individual’s proneness to overconfidence. Drawing on the dual process concept of reasoning from psychology it is argued that the focus of one’s education may have an influence on individual levels of overconfidence through distinct ways of reasoning that are acquired and practiced during higher education. As support for this theory, data on the overconfidence of CEOs of the largest German companies is used and experiments for future research on this topic are suggested.

Download or read book Exploring the Bright Side and Down Side of Ceo Overconfidence on Firm Performance written by 張耘庭 and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Overconfidence in SMEs written by Anna Invernizzi and published by Springer. This book was released on 2017-09-19 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents a review of the role of overconfidence in small firms and explores how biased judgment and decision-making can affect business performance. Whilst the overconfidence construct has been studied in detail, there are no systematic reviews of its role in SMEs as of yet. Examining the decisions made by entrepreneurs, this study offers clear solutions on how to improve business accuracy, reduce disadvantageous investments and prevent bankruptcy. Providing an empirical analysis of overconfidence in the sport industry, this new book will not only be of interest to academics of entrepreneurship and small enterprises, but also to sport managers.

Download or read book CEO Overconfidence and the Probability of Bankruptcy written by Ruhul Amin and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis examines the relation between CEO overconfidence and the probability of bankruptcy. In addition to the main research question, we develop two additional hypotheses. We evaluate the potential link or channel between CEO overconfidence and the probability of bankruptcy. In the relationship between CEO overconfidence and the probability of bankruptcy, we seek for any interaction effects of CEO dominance. It is not uncommon for CEOs to be overconfident about their firms' prospects. In our sample, we use data from the year 2000 to 2019 for US companies. We proxy the bankruptcy probability using Altman's Z Score. We use a stock option-driven measure of overconfidence, and this measure assumes that non-overconfident CEO will exercise their stock options if it is in the money, while overconfident CEOs will hold stock options beyond a rational threshold. We construct both continuous and indicator-based measures of overconfidence to test the hypotheses. The empirical findings reveal that CEO overconfidence increases the probability of bankruptcy. We do not find any evidence in favor of overinvestment which we consider as a channel through which overconfidence leads to increased bankruptcy risk. We also find that dominant and overconfident CEOs are suited for innovative firms, implying that giving an overconfident CEO a dominant position can minimize a firm's probability of bankruptcy. The implications of this study are that firms should be cautious in hiring overconfident CEO and they should take measures to reduce the negative effects of CEO overconfidence like the probability of bankruptcy. One way to reduce the probability of bankruptcy in innovative firms is to appoint overconfident CEO into a dominant position.

Download or read book Essays on CEO Overconfidence written by Neslihan Yilmaz and published by . This book was released on 2009 with total page 200 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Impact of Overoptimism and Overconfidence on Economic Behavior written by Andreas Müller and published by diplom.de. This book was released on 2007-11-01 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inhaltsangabe:Introduction: Economic theory normally focuses on rational agents optimizing individual utility. Since the second half of the 20th century, this viewpoint has been enriched by findings from the field of psychology. A new trait of research was created called behavioral economics . It takes into account subjective characteristics such as asymmetric preference and judgment, or limits of rational processing, willpower, and greed. This paper aims to give an overview of two related human traits that have attracted particularly wide interest, namely overconfidence and overoptimism. The two are closely related to each other, and often used synonymously. Broadly speaking, overconfidence results in underestimation of future risks, e.g. the riskiness of future cash flows, whilst overoptimism leads to an overestimation of future positive outcomes, e.g. the future returns of a company. Besides, the paper wants to deduct suggestions for further research, by systematically identifying uncovered topics in existing literature. Usually Alpert and Raiffa are credited with the first discovery of overconfidence. However, the most influential study is probably Russo and Schoemaker. It was published in the Sloan Management Review and communicated the topic to a broader audience for the first time. In particular, it revealed that assumingly rational managers were prone to overconfidence, too. This challenged traditional management doctrines and generated interest in a better understanding of the topic and further research. To exemplify overconfidence, Russo and Schoemaker asked managers to give numerical intervals for ten general-knowledge questions, such that nine out of the ten answers would be correct. On average participants included the correct value within their interval only 5 out of 10 times, i.e. they underestimated potential errors in their estimations. Svenson is probably the most influential source regarding overoptimism. He made the subject intuitively understandable and established a standard measurement method that could be easily used for subsequent research. To give an example of overoptimism: Svenson asked students to compare their driving skills to those of their classmates. Roughly 80% believed they belonged to the top 50%, i.e. they overestimated their abilities. This paper also provides a closer look at the empirical methods normally applied in field studies. Although the phenomena are intuitively understandable, empirical research [...]

Download or read book Managerial Overconfidence and Education Insights from Dual Process Theory written by Maximilian Margolin and published by GRIN Verlag. This book was released on 2013-02-07 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2012 in the subject Business economics - Miscellaneous, grade: 1,3, University of Mannheim, course: Business economics, language: English, abstract: Based on data from German DAX-CEOs in this thesis it is argued, that in different fields of education individuals acquire different mind-sets which influence their proneness to overconfidence. Using the framework of dual process reasoning it is proposed that education in quantitative fields, such as mathematics or physics, hampers overconfidence while individuals educated in qualitative fields, such as law or the humanities, become more prone to overconfidence.

Download or read book Looking at the Bright Side written by Si Chen and published by . This book was released on 2018 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: The motivation value of confidence postulates that individual effort provision is increasing in beliefs on one's own productivity. This relationship also holds for overconfident individuals who have exaggerated productivity beliefs (motivation value of overconfidence). We present first empirical evidence on the existence of a motivation value of absolute overconfidence that many microeconomic models build on. Moreover, we document that debiasing information increases the accuracy of productivity beliefs of overconfident individuals but comes at the cost of diminished effort provision - a result that is of obvious relevance for many contexts such as labor relations or learning at school. As a further conceptual contribution, we offer a novel strategy for identifying significant overconfidence at the individual level.

Download or read book Levelheaded Leaders written by and published by . This book was released on 2006 with total page 113 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Overconfidence and its Influence on Risk written by Christopher Knoll and published by GRIN Verlag. This book was released on 2021-11-18 with total page 11 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2016 in the subject Psychology - Industrial and organizational psychology, grade: 1.7, University of Passau, course: Behavioral Economics and the Seven Sins, language: English, abstract: In a study conducted in 1980 drivers were surveyed about their driving skills in comparison to a group of others. In her experiment, Svenson analyses how people judge their own skill and risk taking engaged in risky activities. The result of the experiment shows that 88% of US subjects and 77% of Swedish subjects judged their skills above the average skill in their subject group. Preston and Harris (1965) indicate even more bias from subjects. They compared 50 drivers which were involved in accidents, besides being hospitalized, they still showed means stating that they judged themselves more skillful than the average driver. The central element of the economic paradigm is homo economicus. Homo economicus is described as an individual with rational actions. The homo economicus faces a situation with limited resources to satisfy his needs. Therefore, the homo economicus uses rational decisions to optimize his outcome and gain the highest utility possible. Behavioral economic research on the other hand distinguishes a deviance of human behavior from the rational homo economicus as can be observed in Svenson’s study. The behavior is called overconfidence, which is a widely discussed phenomenon in behavioral economic literature. Psychological studies show that most people are overconfident about their own relative abilities, tend to underestimate their competition and make unreasonably optimistic predictions about their futures. In the following, the characteristics of the behavioral model of overconfidence will be further discussed. Subsequently, the influence of overconfidence on risk taking will be evaluated.

Download or read book The Influence of Top Management Characteristics on Corporate Credit Risk Measures written by Elias Fiebig and published by GRIN Verlag. This book was released on 2016-08-03 with total page 71 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2016 in the subject Business economics - Business Management, Corporate Governance, grade: A, Copenhagen Business School (Department of Finance), language: English, abstract: Inspired by previous research this paper investigates whether personal CEO characteristics such as age, CEO tenure, gender, MBA and variable salary (%) have a significant effect on firm bankruptcy risk measured using the Altman-Z-Score and the Ohlson-O-Score. This work is based on literature suggesting (i) CEO managerial characteristics such as overconfidence and optimism lead to higher leverage and increased risk-taking and that (ii) higher levels of debt and increased risk-taking behavior add to the likelihood of corporate financial distress. Using panel data on S&P 500 constituents during 1994-2014 our results provide evidence that CEO age and holding an MBA is positively associated with bankruptcy risk while CEO tenure and variable salary (%) seem to be negatively related to a firm’s propensity to default. Collectively, our results remain mostly unchanged over various robustness tests employing both pooled OLS and the least squares dummy variable (LSDV) model as well as year, industry and company fixed effects as control variables. Next to significant support that managerial attributes, traits, and style may help to understand organizational outcomes, this project also provides insights how available public information can be used to further explain style effects by disentangling them into separate, measurable impact factors.

Download or read book CEO Overconfidence and Innovation written by Alberto Galasso and published by . This book was released on 2010 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Are CEOs' attitudes and beliefs linked to their fims' innovative performance? This paper uses Malmendier and Tate's measure of overconfidence, based on CEO stock-option exercise, to study the relationship between a CEO's 'revealed beliefs' about future performance and standard measures of corporate innovation. We begin by developing a career concern model where CEOs innovate to provide evidence of their ability. The model predicts that overconfident CEOs, who underestimate the probability of failure, are more likely to pursue innovation, and that this effect is larger in more competitive industries. We test these predictions on a panel of large publicly traded firms for the years 1980 to 1994. We ?nd a robust positive association between overconfidence and citation-weighted patent counts in both cross-sectional and fixed-effect models. This effect is larger in more competitive industries. Our results suggest that overconfident CEOs are more likely to take their firms in a new technological direction -- National Bureau of Economic Research web site.

Download or read book An Investigation of Selected Effects of Overconfidence on Business Success and on the Valuation by Market Participants written by Walid Esmatyar and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Making the Same Mistake All Over Again written by Guoli Chen and published by . This book was released on 2014 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Firms often make mistakes, from simple manufacturing overruns all the way to catastrophic blunders. However, there is considerable heterogeneity in the nature of corporate responses when faced with evidence that an error has taken place, and, therefore, in the likelihood that such errors will reoccur in the future. In this paper, we explore an important but understudied influence on firms' responses to corrective feedback - a CEO's level of overconfidence. Using multiple distinct measures of overconfidence and the empirical context of voluntary corporate earnings forecasts, we find strong, robust evidence that firms led by overconfident CEOs are less responsive to corrective feedback in improving management forecast accuracy. We further show that this relationship is moderated by prior forecast error valence, time horizon, and managerial discretion.

Download or read book CEO Overconfidence in Banking written by Felix Suntheim and published by . This book was released on 2016 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study empirically investigates bank risk taking from a behavioral perspective. More specifically, we analyze the impact of an overconfident CEO, defined as one who has systematically upward biased beliefs about the returns of his investment projects, on bank performance and risk taking. Overconfidence is measured using a sample of international banks from 1997 to 2008 with full information on CEO option holdings. Ingersoll (2006) determines the optimal exercise time for undiversified option holders under realistic assumptions on risk aversion. Following Malmendier & Tate (2005) classify CEOs as overconfident if they keep their options too long to be considered rational. We find that banks with overconfident CEOs did not perform worse during the financial crisis but had higher risk throughout the sample period. However, active boards seem to mitigate this effect.