Are over-confident VPs more likely to be promoted to CEO?

• Main Authors: Loo, Pei Yu., Tan, Zi Jian., Lim, Mathew Chin Kang.
• Other Authors: Nanyang Business School
• Format: Final Year Project
• Language: English
• Published: 2012
• Subjects: DRNTU::Business::Management::Leadership
• Online Access: http://hdl.handle.net/10356/48314
• Institution: Nanyang Technological University

Goel and Thakor (2008) predict that over-confident vice-presidents (VPs) are more likely to be promoted to CEOs than rational risk-averse VPs, because it is less expensive to motivate the former to take risks. We are the first to empirically test this prediction in their literature. We use two alternative measures of over-confidence, and find supporting evidence consistently: (1) option holdings and (2) self-attributing linguistic tone during CNBC interviews of the VPs. We also find that media visibility of the VPs measured by the Nielsen viewership increases the probability of promotion. Rank order tournament being a significant determinant of promotion in every company (Bognanno 2001), we find that tournament negatively affects the promotion of less confident managers, and that visibility is even more important for promotion under tougher tournament.