Investors’ perception of CEO overconfidence: evidence from the cost of equity capital

被引：21
作者：
Aghazadeh S. [1 ]
Sun L. [2 ]
Wang Q. [3 ]
Yang R. [4 ]
机构：
[1] Department of Accounting, E.J. Ourso College of Business, Louisiana State University, Baton Rouge, 70803-6304, LA
[2] Department of Accounting, College of Business, University of North Texas, Denton, 76201, TX
[3] Department of Accounting, College of Business, Iowa State University, Ames, 50011, IA
[4] E. Philip Saunders College of Business, Rochester Institute of Technology, 105 Lomb Memorial Drive, Rochester, 14623, NY
来源：
Review of Quantitative Finance and Accounting | 2018年 / 51卷 / 4期
关键词：
CEO overconfidence; Cost of equity capital; Equity issuance;
D O I：
10.1007/s11156-017-0699-9
中图分类号：
学科分类号：
摘要：
Prior literature documents that CEO overconfidence plays an important role in corporate financial reporting and accounting decisions. However, an unexplored issue is how investors perceive the risks associated with CEO overconfidence. This study examines the effect of CEO overconfidence on the cost of equity capital. We find that the association between CEO overconfidence and the cost of equity is nonlinear: a moderate level of CEO overconfidence results in the lowest cost of equity capital after controlling for other known determinants of the cost of equity. We also find an inverted nonlinear relation between CEO overconfidence and equity issuance, which corroborates our main conclusion of the nonlinear effect of CEO overconfidence on the cost of equity. Our results are robust to alternative overconfidence measures, cost of equity measures, and change analysis. © 2018, Springer Science+Business Media, LLC, part of Springer Nature.
引用
收藏
页码：1129 / 1150
页数：21
相关论文
共 54 条
[21]  
Fama E.F., MacBeth J.D., Risk, return, and equilibrium: empirical tests, J Polit Econ, 81, 3, pp. 607-636, (1973)
[22]  
Francis J., LaFond R., Olsson P.M., Schipper K., Costs of equity and earnings attributes, Account Rev, 79, 4, pp. 967-1010, (2004)
[23]  
Galasso A., Simcoe T.S., CEO overconfidence and innovation, Manag Sci, 57, 8, pp. 1469-1484, (2011)
[24]  
Gervais S., Heaton J.B., Odean T., Overconfidence, compensation contracts, and capital budgeting, J Financ, 66, 5, pp. 1735-1777, (2011)
[25]  
Gode D., Mohanram P., Inferring the cost of capital using the Ohlson–Juettner model, Rev Account Stud, 8, 4, pp. 399-431, (2003)
[26]  
Goel A.M., Thakor A.V., Overconfidence, CEO selection, and corporate governance, J Financ, 63, 6, pp. 2737-2784, (2008)
[27]  
Gordon L.A., Wilford A.L., An analysis of multiple consecutive years of material weaknesses in internal control, Account Rev, 87, 6, pp. 2027-2060, (2012)
[28]  
Hail L., Leuz C., International differences in the cost of equity capital: do legal institutions and securities regulation matter?, J Account Res, 44, 3, pp. 485-531, (2006)
[29]  
Hambrick D.C., Mason P.A., Upper echelons: the organization as a reflection of its top managers, Acad Manag Rev, 9, 2, pp. 193-206, (1984)
[30]  
Heaton J.B., Managerial optimism and corporate finance, Financ Manag, 31, 2, pp. 33-45, (2002)
123456