The informational role of overconfident CEOs

The informational role of overconfident CEOs

We study how overconfident CEOs communicate with the market and whether this has implications on the firm’s information environment. Textual analysis reveals that overconfident CEOs communicate using less negative tone in their 10K/Q filings. Our evidence suggests that overconfident CEOs provide mar...

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Bibliographic Details
Main Authors: WEI, Chi Shen, ZHANG, Lei
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2018
Subjects:
Overconfident CEOs
Information Asymmetry
Cost of Capital
Short Interest
Finance and Financial Management
Leadership Studies
Strategic Management Policy
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/6415
https://ink.library.smu.edu.sg/context/lkcsb_research/article/7414/viewcontent/Info_Role_Overconfident_CEO_2018_wp.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:We study how overconfident CEOs communicate with the market and whether this has implications on the firm’s information environment. Textual analysis reveals that overconfident CEOs communicate using less negative tone in their 10K/Q filings. Our evidence suggests that overconfident CEOs provide market participants with more value-relevant information as sell-side analysts make more accurate forecasts of their firm’s future earnings. Consistent with a reduction in asymmetric information, implied cost of equity capital is lower. However, not all investors benefit as the information advantage of short sellers disappears in the stocks of overconfident CEOs.

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