Terrorist attacks and corporate investment: The beneficial value of CEO overconfidence |
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| Affiliation: | 1. Dongguk Business School, Dongguk University, 30, Pildong-ro 1-gil, Jung-gu, Seoul, Seoul 04620, Republic of Korea;2. Department of Economics and Finance, Soonchunhyang University, 22, Soonchunhyang-ro, Sinchang-myeon, Asan-si, Chungcheongnam-do 31538, Republic of Korea;1. Central Bank of Turkey, Ümraniye, İstanbul, Turkey;2. Department of Business Administration, Middle East Technical University, 06800 Ankara, Turkey;1. School of Finance and Accounting, Fuzhou University of International Studies and Trade, China;2. DeGroote School of Business, McMaster University, Canada;3. Xiamen National Accounting Institute, China;4. School of Management, Xiamen University, China;1. Department of Electrical and Electronics Engineering, University of West Attica, Ancient Olive Grove Campus, 12241 Egaleo, Greece;2. Institute for Astronomy, Astrophysics, Space Applications and Remote Sensing, National Observatory of Athens, Metaxa and Vasileos Pavlou, Penteli, GR-15236 Athens, Greece;1. Bucharest University of Economic Studies, Bucharest, Romania;2. National Scientific Research Institute for Labour and Social Protection, Department of Education, Training and Labour Market, Bucharest, Romania;3. Institute for Economic Forecasting, Romanian Academy, Bucharest, Romania;1. School of Statistics and Mathematics, Shandong University of Finance and Economics, Jinan, China;2. School of Urban and Regional Science, Shanghai University of Finance and Economics, Shanghai, China;3. Department of Applied Finance, Macquarie University, Sydney, Australia;4. School of Geography, Earth and Environmental Sciences, University of Birmingham, Birmingham, UK |
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| Abstract: | This study examines whether terrorist attacks influence corporate investments and firm value. We expect that overconfident CEOs can mitigate the underinvestment problem caused by terrorist attacks because they overestimate the returns on investment. Using measures of terrorist attack proximity in the U.S., we find that firms with non-overconfident CEOs significantly decrease their investment growth when terrorist attacks affect them, while firms with overconfident CEOs do not. Consequently, the impact of terrorist attacks on firm value varies between firms with overconfident and non-overconfident CEOs. Overall, this study suggests that CEO overconfidence can benefit shareholder value under certain conditions, such as terrorist attacks. |
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