CEO Overconfidence and the Speed of Adjustment of Cash Holdings

CFCI seminar
Public lectures / seminars

Thursday 22 April 2021

02:00 PM - 04:00 PM

Location

Online

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Event details

Speaker 

Professor Yilmaz Guney

Abstract

We examine the link between CEO overconfidence and speed of adjustment (SOA) of cash holdings for listed US firms. We find a negative effect of over­confident CEOs on the SOA. Further, CEO overconfidence increases the asym­metry in the SOA between firms with excess cash and those with a cash deficit: The SOA is faster (slower) when there is excess cash (deficit). Importantly, we find that the SOA is value-relevant above and beyond cash holding levels. We address endogeneity concerns through difference-in-differences and propensity score matching specifications. Our results are robust to alternative measures of overconfidence, estimation methods, and corporate governance quality.