Can Excess CEO Confidence Increase Risk of Corporate Failure?

A recent report by KPMG [1] on the behavior of chief executive officers (CEOs) suggests that 67 percent of UK CEOs trust their intuition over data. The impact of intuition may become problematic if it is driven by biased perception. One of the most common biases among CEOs is overconfidence, a tendency to believe that they are better than they objectively are, particularly in their judgment, ability, and knowledge.

In a recent paper, we investigate whether CEO overconfidence can help explain the probability of corporate failure. Despite extensive research exploring the consequences of managerial overconfidence for corporate policies and outcomes, … Read more