Journal ArticleDOI
CEO Overconfidence and Innovation
Alberto Galasso,Timothy Simcoe +1 more
TLDR
Ramdas et al. as mentioned in this paper used a 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.Abstract:
Are the attitudes and beliefs of chief executive officers (CEOs) linked to their firms' innovative performance? This paper uses a 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 from 1980 to 1994. We find 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.
This paper was accepted by Kamalini Ramdas, entrepreneurship and innovation.read more
Citations
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Journal ArticleDOI
Psychology and Economics: Evidence from the Field
TL;DR: The authors survey the empirical evidence from the field on three classes of deviations from the standard model: nonstandard prefer- ences, nonstandard beliefs, and nonstandard decision making, and present evidence on overcon- fidence, on the law of small numbers and on projection bias.
Journal ArticleDOI
Credit Supply and Corporate Innovation
Journal ArticleDOI
CEO Overconfidence and Stock Price Crash Risk
TL;DR: This paper examined the association between chief executive officer (CEO) overconfidence and future stock price crash risk and found that firms with overconfident managers overestimate the returns to their investment projects and misperceive negative net present value (NPV) projects as value creating.
Journal ArticleDOI
Pilot CEOs and corporate innovation
TL;DR: This article found evidence that chief executive officers' (CEOs) hobby of flying airplanes is associated with significantly better innovation outcomes, measured by patents and citations, greater innovation effectiveness, and more diverse and original patents.
Journal ArticleDOI
Behavioral CEOs: The Role of Managerial Overconfidence
Ulrike Malmendier,Geoffrey Tate +1 more
TL;DR: In this paper, the authors provide a theoretical and empirical framework that allows them to synthesize and assess the burgeoning literature on CEO overconfidence, and they also provide empirical evidence that overconfidence matters for corporate investment decisions in a framework that explicitly addresses the endogeneity of firms' financing constraints.
References
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Journal ArticleDOI
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Posted Content
Market value and patent citations
TL;DR: Hall et al. as mentioned in this paper explored the usefulness of patent citations as a measure of the "importance" of a firm's patents, as indicated by the stock market valuation of the firm's intangible stock of knowledge.
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