Overconfident CEOs/senior executives tend to have excessively positive views of their own skills and their company’s future performance. We hypothesize that overconfident managers are more likely to engage in reckless or intentional actions/disclosures that give rise to securities class actions (SCAs). Empirical evidence is supportive: Overconfident CEOs/senior executives increase SCA likelihood, though litigation risk is ameliorated through improved governance, such as following the Sarbanes–Oxley Act of 2002. Post-SCA, companies are less likely to hire an overconfident CEO. Following an SCA, overconfident CEOs appear to moderate behavior and to reduce their litigation risk.

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O ur paper investigates spillover effects across different business segments of publicly traded financial conglomerates. We find that the investment decisions of mutual fund shareholders do not depend only on the prior performance of the mutual funds; they also depend on the prior performance of the funds' management companies. Flows into equity and bond mutual funds increase with the prior stock price performance of the funds' management companies after controlling for fund performance and other fund characteristics. The sensitivity of flows to the management company's performance is not justified by the subsequent performance of the affiliated funds. The results indicate that the reputation of a company's brand has a significant impact on the behavior of its customers.