Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract We develop a model of the effect of CEO overconfidence on dividend policy and empirically examine many of its predictions. Consistent with our main prediction, we find that the level of dividend payout is lower in firms managed by overconfident CEOs.
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Documents in EconStor mayWe document that this reduction in dividends associated with CEO overconfidence is greater in firms with lower growth opportunities, lower cash flow, and greater information asymmetry. We also show that the magnitude of the positive market reaction to a dividend-increase announcement is lower for firms managed by overconfident CEOs.Our overall results are consistent with the predictions of our model. * We are grateful to Ulrike Malmendier for providing the data on CEO overconfidence and for her insightful comments. We thank Irina Krop for research assistance and Dirk
We develop a model that shows that an overconfident manager, who sometimes makes value-destroying investments, has a higher likelihood than a rational manager of being deliberately promoted to CEO under "value-maximizing" corporate governance. Moreover, a risk-averse CEO's overconfidence enhances firm value up to a point, but the effect is "nonmonotonic" and differs from that of lower risk aversion. Overconfident CEOs also underinvest in information production. The board fires both excessively diffident and excessively overconfident CEOs. Finally, Sarbanes-Oxley is predicted to improve the precision of information provided to investors, but to reduce project investment. Copyright (c) 2008 The American Finance Association.
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