What Drives Role of Overconfidence in Managerial Decisions?

UNIVERSITY OF TECHNOLOGY SYDNEY

Finance Discipline Group Research Seminars in Finance

Topic: Optimism or Over-Precision? What Drives the Role of Overconfidence in Managerial Decisions?

Speaker: Kelvin Tan, University of Queensland

Abstract: Overconfidence can be viewed as having two dimensions: optimism and over-precision. Extant empirical studies focus mostly on the former due to the difficulty in measuring the latter. This study develops accessible empirical measures to disentangle these two dimensions through a novel exploitation of earnings forecasts issued by firm managers. These measures capture appreciably different aspects of the link between overconfidence and managerial decisions. In terms of investment, CEOs displaying excess precision are more likely to scale up investment in real assets (especially via M&A); firms with more optimistic CEOs display no such proclivity. On the financing side, more optimistic CEOs and overly precise CEOs share a higher propensity to issue debt.

A light lunch will be provided at 1p.m. Please RSVP for catering purposes to Mala Kapahi by 12 noon on Monday, 2nd October.

Date: Wednesday, 4th October 2017     

Time: 12.00 – 1.00 p.m.

Venue: University of Technology, Sydney           

Building 8, Room 8.002 Dr Chau Chak Wing Building

14 - 28 Ultimo Road, Ultimo

Coordinator: Adrian Lee (Ph: +61 2 9514 7765)

Enquiries: Mala Kapahi (Ph: +61 2 9514 7777)

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UTS acknowledges the Gadigal people of the Eora Nation, the Boorooberongal people of the Dharug Nation, the Bidiagal people and the Gamaygal people, upon whose ancestral lands our university stands. We would also like to pay respect to the Elders both past and present, acknowledging them as the traditional custodians of knowledge for these lands.