Extant research on CEO hubris has amassed substantial evidence on the positive association of this prominent managerial disposition and CEOs’ attraction to challenging and consequential strategic activities. Similarly, one may well anticipate more hubristic CEOs to strive for frequent transformations of their firms’ overarching trajectories as they overestimate their ability to reap the fruits of such challenging and highly consequential endeavors. In contrast to these arguments, however, higher levels of hubris might also lead CEOs to see little reason for scrutinizing and adapting extant paths in light of the magnificent prospects under their outstanding leadership. We explicate this theoretical obscurity surrounding the dispositional preference for change or steadiness associated with higher degrees of CEO hubris by carving out sets of competing hypotheses on the effect of CEO hubris on two key domains of change within the immediate purview of a CEO: strategic change and top management team (TMT) membership change. Empirically, we examine these arguments using a panel data set comprising 1, 197 S&P 1500 CEOs and find strong support for a negative effect of CEO hubris on a set of indicators of strategic change as well as on TMT membership change. Our results indicate that, beyond their attraction to manifold and challenging strategic activities, more hubristic CEOs exhibit a preference for steadiness that may prevail in the overall effect of hubris on certain organizational outcomes.
As a well‐studied executive bias, CEO overconfidence usually has negative connotations – although empirical evidence of its performance effects remains inconclusive. By theorizing on CEO overconfidence in a turnaround situation, we propose that CEO overconfidence can either help or hinder turnaround performance, depending on whether the overconfident CEO is the incumbent who steered the firm into dire straits, or a successor hired during decline. Our empirical findings suggest that overconfidence in an incumbent CEO damages turnaround performance; replacing overconfident incumbents improves turnaround performance and overconfident successors hired during decline enhance turnaround performance. Exploratory post‐hoc analyses further suggest that these effects are driven by the divergent ways in which overconfidence biases incumbent and successor CEOs’ assessment of organizational decline. Comprehensive implications for research and practice on CEO overconfidence are discussed.
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