This paper presents a reconciliation of the three distinct ways in which the research literature has defined overconfidence: (1) overestimation of one’s actual performance, (2) overplacement of one’s performance relative to others, and (3) excessive precision in one’s beliefs. Experimental evidence shows that reversals of the first two (apparent underconfidence), when they occur, tend to be on ...

a r t i c l e i n f o Keywords: Executive turnover Top management teams Strategic change Discontinued operations Power circulation theory While previous research suggests that CEO turnover correlates with strategic changes in firm's operations such as discontinuation of operations, we demonstrate that such findings apply only to specific types of CEO turnover, and only if non-CEO members of the...

We analyze the interactions between internal and external control mechanisms in a framework in which the board selects the CEO and then decides whether to retain or dismiss him after observing a signal on his ability. The novel aspect of our paper is that we consider both the hiring and the firing of the CEO by the board. The type of the board is defined by its ability to select a good CEO so t...

This paper o¤ers direct evidence of the role of managerial talent in the market for CEOs. We construct two empirical measures of CEO talent based on perceptions of a CEO’s reputation and prior career outcomes. Using a newly hand-collected sample of 2,195 CEO successions between 1993 and 2005, we document that: 1) …rst-year total pay is an increasing and convex function of CEO talent, and increa...

How does overconfidence arise and persist in the face of experience and feedback? We examine experimentally how individuals’ beliefs about their absolute, as opposed to relative, performance on a quiz react to noisy, but unbiased, feedback. Participants believe themselves to have received ‘unlucky’ feedback and they overestimate their own scores, but they exhibit no overconfidence in non-ego-re...

We examine whether CEO power can explain the vast amount defined benefit pensions received by them. Analyzing a sample of UK firms from 2003 to 2006, we find that pensions constitutes of almost 15% of the average CEO compensation. Statistical analysis shows that the variables representing increased CEO power have a positive influence on pension pay. We also find that the presence of defined ben...

Separation between CEO and Chairman of the Board is typically viewed as evidence of good corporate governance. Surprisingly, the literature has failed so far to uncover any significant relation between CEO/Chairman duality and firm performance. By distinguishing between periods with and without CEO turnover, we empirically identify two offsetting effects: the correlation between duality and per...

Title of dissertation: SELECTION OF STAR CEOS AND ITS IMPLICATIONS ON FIRM PERFORMANCE AND CEO COMPENSATION Minwen Li, Doctor of Philosophy, 2010 Dissertation directed by: Professor Vojislav Maksimovic, Dean's Chair Professor of Finance, Department of Finance My dissertation examines a board’s decision to hire a star CEO and the implication of such decision on the new CEO compensation and firm ...