CEO overconfidence and the tone of press release

Gong, Rong

doi:10.1111/acfi.12950

Cited by 13 publications

(6 citation statements)

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“…Media attention affects the CEO's work schedule (Gamache & McNamara, 2019), and media pressure can weaken the CEO's ability to manipulate the intensity of corporate environmental disclosure (Li, Li, et al, 2019). CEOs who receive negative press coverage can damage the company's reputation (Love et al, 2017), and overconfident CEOs issue more positive company news and receive more positive market reactions (Gong, 2022). Narcissistic CEOs are interested in improving CSR (Chatterjee & Pollock, 2017), and in‐depth media attention and high‐frequency coverage can promote selective improvement in environmental disclosure by heavily polluting firms when they face a competitive market (Chen & Zhang, 2022).…”

Section: Literature Analysis and Research Hypothesismentioning

confidence: 99%

Environmental backgrounds of CEOs and corporate environmental management information disclosure: The mediating effects of financing constraints and media attention

Zhu

2023

Corp Soc Responsibility Env

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In the context of the global economy's green and low‐carbon development, companies are paying increasing attention to environmental management. This study compiles statistics on Chinese listed firms from 2010 to 2020 and examines the influence of CEOs' environmental background on corporate environmental management information disclosure based on imprinting theory. It found that CEOs with environmental backgrounds are more willing to disclose corporate environmental management information, and the level of disclosure is high. By attracting media attention and reducing the company's financing constraints, CEOs with an environmental background can enhance the level of corporate environmental management information disclosure, according to the analysis of the impact mechanism. Further research revealed that CEO environmental background promoted corporate environmental management information disclosure more significantly in state‐owned and heavily polluting enterprises.

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Section: Literature Analysis and Research Hypothesismentioning

confidence: 99%

Environmental backgrounds of CEOs and corporate environmental management information disclosure: The mediating effects of financing constraints and media attention

Zhu

2023

Corp Soc Responsibility Env

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“…Further, several studies have emphasized the potential for CEOs to influence the tone and complexity of narrative disclosures due to their individual characteristics, including overconfidence (Brennan and Conroy, 2013; Davis et al ., 2015; Buchholz et al ., 2018; DeBoskey et al ., 2019). Gong (2023) delves specifically into this aspect, exploring the influence of CEOOC on the tone of press releases. In this comprehensive study spanning from 2000 to 2018, Gong discovers that firms led by overconfident CEOs tend to issue press releases with a more positive spin, subsequently attracting more favorable reactions from the market.…”

Section: Theoretical Framework Literature Review and Hypothesis Devel...mentioning

confidence: 99%

“…The literature has provided in-depth insights into the impact of CEO overconfidence on various corporate behaviors. From corporate innovation (Hirshleifer et al ., 2012) and risky product introduction (Simon and Houghton, 2003) to corporate dividend policies (Deshmukh et al ., 2013) and press release tone (Gong, 2023), the consequences of CEO overconfidence are well-explored. Grounded in the foundational frameworks of agency and signaling theory, this research delves into the mechanisms through which CEO overconfidence might influence financial reporting complexity.…”

Section: Conclusion and Remarksmentioning

confidence: 99%

“…Overconfident CEOs, characterized by their inclination for excessive investment and participation in value-diminishing mergers (Malmendier and Tate, 2005, 2008), often view their firms as undervalued and perceive external financing as excessively costly (Malmendier et al ., 2010). Their influence extends to realms like corporate innovation (Hirshleifer et al ., 2012), dividend policies (Deshmukh et al ., 2013), debt maturity structures (Huang et al ., 2016) and even the tone of press releases (Gong, 2023). Moreover, such CEOs exhibit propensities to postpone loss recognition and embrace less conservative accounting strategies (Ahmed and Duellman, 2013), collectively pointing to the significant overlap between overconfidence and financial reporting.…”

Section: Introductionmentioning

confidence: 99%

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CEO overconfidence and financial reporting complexity: evidence from textual analysis

Rajabalizadeh

2023

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PurposeThis study investigates the relationship between the Chief Executive Officer's (CEO) overconfidence and financial reporting complexity in Iran, a context characterized by weak corporate governance and heightened managerial discretion.Design/methodology/approachThe sample consists of 1,445 firm-year observations from 2010 to 2021. CEO overconfidence (CEOOC) is evaluated using an investment-based index, specifically capital expenditures. Financial reporting complexity (Complexity) is measured through textual features, particularly three readability measures (Fog, SMOG and ARI) extracted from annual financial statements. The ordinary least squares (OLS) regression is employed to test the research hypothesis.FindingsResults suggest that CEOOC is positively related to Complexity, leading to reduced readability. Additionally, robustness analyses demonstrate that the relationship between CEOOC and Complexity is more distinct and significant for firms with lower profitability than those with higher profitability. This implies that overconfident CEOs in underperforming firms tend to increase complexity. Also, firms with better financial performance present a more positive tone in their annual financial statements, reflecting their superior performance. The findings remain robust to alternative measures of CEOOC and Complexity and are consistent after accounting for endogeneity issues using firm fixed-effects, propensity score matching (PSM), entropy balancing approach and instrumental variables method.Research limitations/implicationsThis study adds to the literature by delving into the effect of CEOs' overconfidence on financial reporting complexity, a facet not thoroughly investigated in prior studies. The paper pioneers the use of textual analysis techniques on Persian texts, marking a unique approach in financial reporting and a first for the Persian language. However, due to the inherent challenges of text mining and feature extraction, the results should be approached with caution.Practical implicationsThe insights from this study can guide investors in understanding the potential repercussions of CEOOC on financial reporting complexity. This will assist them in making informed investment decisions and monitoring the financial reporting practices of their invested companies. Policymakers and regulators can also reference this research when formulating policies to enhance financial reporting quality and ensure capital market transparency. The innovative application of textual analysis in this study might spur further research in other languages and contexts.Originality/valueThis research stands as the inaugural study to explore the relationship between CEOs' overconfidence and financial reporting complexity in both developed and developing capital markets. It thereby broadens the extant literature to include diverse capital market environments.

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“…According to Upper Echelons Theory, managers' characteristics affect their choices and decisions (Hambrick & Mason, 1984). Scholars have investigated the impact of managers' characteristics on corporate governance from various aspects, such as military experience (Benmelech & Frydman, 2015), overconfidence (Gong, 2023; Malmendier & Tate, 2008), gender (Jin et al, 2014), age (Child, 1975) and tenure (Ali & Zhang, 2015). However, very few scholars have examined the impact of managerial inclusiveness on corporate innovation in Chinese listed companies.…”

Section: Introductionmentioning

confidence: 99%

Managerial inclusiveness and corporate innovation in China

Deng,

2023

Accounting & Finance

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This study explores how managerial inclusiveness affects corporate innovation. Using an annual dataset of A‐share Chinese listed companies from 2008 to 2021, we find that managerial inclusiveness is positively related to corporate innovation. Market competition and team heterogeneity positively moderate the relationship between managerial inclusiveness and innovation. In addition, managerial inclusiveness in state‐owned enterprises plays a more significant role in promoting corporate innovation than it does in non‐state‐owned enterprises. By investigating the mechanism of influence, we found that inclusive managers can promote corporate innovation by relaxing internal controls and increasing corporate risk‐taking.

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CEO overconfidence and the tone of press release

Cited by 13 publications

References 75 publications

Environmental backgrounds of CEOs and corporate environmental management information disclosure: The mediating effects of financing constraints and media attention

Environmental backgrounds of CEOs and corporate environmental management information disclosure: The mediating effects of financing constraints and media attention

CEO overconfidence and financial reporting complexity: evidence from textual analysis

Managerial inclusiveness and corporate innovation in China

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