Does Corporate Governance Affect Managerial Optimism? Evidence from NYSE Panel Data Firms

Abstract

Previous research in behavioral corporate finance has demonstrated that managerial optimism has an explanatory power and it can explain observed distortions in corporate decisions. What makes it special is its being a major source of investment cash flow sensitivity and it can affect the firm value since it causes overinvestment or overinvestment (

CEO attributes, investment decisions, and firm performance: New insights from upper echelons theory

“…Sitthipongpanich and Polsiri (2015) empirically find that high experience that comes with age leads to effective decisions. Mohamed et al (2012) argued that older CEOs, because of experience, become more rational than young CEOs. Similarly, Carter et al (2010) report a positive link between the age of CEO and firm performance.…”

CEO Overconfidence, Corporate Governance, and R&D Smoothing in Technology-Based Entrepreneurial Firms

“…Organizations engage in internal control practices to ensure reasonable business management, legal compliance, and asset security, improve the efficiency and effectiveness of business operations, promote the realization of development strategies, and ensure that financial reports and related information are truthful and complete. Several studies assess the influence of internal control by boards of directors on CEO overconfidence using a variety of variables, including the proportion of independent directors to company directors (Mohamed et al, 2012 ). The quality of internal control has a negative moderating effect on mergers and acquisitions by overconfident CEOs (Kolasinski and Li, 2013 ).…”

The effect of managerial overconfidence on the market timing ability and post-buyback performance of open market repurchases

“…Malmendier and Tate (2008) find that independent directors can effectively monitor the overconfident managers. Mohamed, Baccar, Fairchild, and Bouri (2012) suggest that corporate governance effectively alleviates the managers' overoptimistic emotions. Schrand and Zechman (2012) indicate that overconfident managers are likely to manipulate the financial reporting of firms with poor governance.…”