The bright side of managerial over-optimism

Gilles Hilary*, Charles Hsu, Benjamin Segal, Rencheng Wang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

60 Scopus citations

Abstract

Human estimation and inference are subject to systematic biases such as overconfidence and over-optimism. In contrast to prior research that has identified multiple negative consequences of these biases, we focus on positive effects. We empirically examine a setting in which over-optimism a) is a related but different bias from overconfidence, b) emerges dynamically in a rational economic framework, and c) generates higher managerial effort. Importantly, this additional effort improves firm profitability and market value.

Original languageAmerican English
Pages (from-to)46-64
Number of pages19
JournalJournal of Accounting and Economics
Volume62
Issue number1
DOIs
StatePublished - 1 Aug 2016

Bibliographical note

Publisher Copyright:
© 2016 Elsevier B.V.

Keywords

  • Firm performance
  • Managerial effort
  • Over-optimism

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