Are overconfident CEOs better leaders? Evidence from stakeholder commitments |
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Authors: | Kenny Phua T Mandy Tham Chishen Wei |
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Institution: | 1. Nanyang Technological University, 50 Nanyang Ave, Singapore 639798, Singapore;2. No Affiliation;3. Singapore Management University, 50 Stamford Road, Singapore 178899, Singapore |
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Abstract: | We find evidence that the leadership of overconfident chief executive officers (CEOs) induces stakeholders to take actions that contribute to the leader's vision. By being intentionally overexposed to the idiosyncratic risk of their firms, overconfident CEOs exhibit a strong belief in their firms’ prospects. This belief attracts suppliers beyond the firm's observable expansionary corporate activities. Overconfident CEOs induce more supplier commitments including greater relationship-specific investment and longer relationship duration. Overconfident CEOs also induce stronger labor commitments as employees exhibit lower turnover rates and greater ownership of company stock in benefit plans. |
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Keywords: | CEO overconfidence Leadership Customer-supplier Employee ownership G32 J53 J54 L14 L22 |
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