Overconfidence, Compensation Contracts, and Capital Budgeting

By Simon Gervais, J. Heaton, Terrance Odean, Bartlit Beck, Herman Palenchar, Franklin Allen, Jonathan B. Berk, Bruce I. Carlin, David J. Denis, Robert Goldstein and 6 more. 2011

550 citations recorded by the source corpus.

Subfields: Accounting, Finance, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/452cd0f31f6d4d1b52bb5946e27ea0eadd1a0d8d

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Benjamin Segal
2. Rencheng Wang
3. Gilles Hilary
4. Charles Hsu
5. Anne L. Beatty
6. Scott Liao
7. Rodrigo S. Verdi
8. Ole‐Kristian Hope

In Finance

1. Rencheng Wang
2. Benjamin Segal
3. Charles Hsu
4. Gilles Hilary

In Management Science and Operations Research

1. Gilles Hilary
2. Charles Hsu

Citations in the corpus

• Executive Overconfidence and Compensation Structure (2015, unknown): “This result is consistent with the exploitation hypothesis (per Gervais et al., 2011), but inconsistent with the strong-incentive hypothesis.”
• CEO Optimism and Incentive Compensation (2014, unknown): “This finding is consistent with Heaton (2002, p. 34), who notes that “the interests of principals may be served best by the design of mechanisms that exploit managerial irrationality rather than squash it. For example, principals may design incentive mechanisms that underpay irrational agents by exp”
• Corporate social responsibility and CEO confidence (2017, unknown): “evidence that overconfident CEOs tend to over-invest and waste money on negative NPV projects (Gervais et al., 2011; Campbell et al., 2011 and Kim, 2013).”
• Executive Compensation: A Survey of Theory and Evidence (2017, unknown): “Gibbons and Murphy (1992) …nd that incentives rise with tenure, although studying pay-performance sensitivity rather than wealth-performance sensitivity.”
• The Origin of Failure: A Multidisciplinary Appraisal of the Hubris Hypothesis and Proposed Research Agenda (2014, background): “…CEOs’ hubris by counting words in the news media relating to overconfidence or its opposite in proximity to the company name and the keyword CEO (Gervais et al., 2011; 5 According to the American Psychiatric Association (1994), seven of the 14 signs related to hubris regard narcissistic…”
• CEO Overconfidence and Corporate Debt Maturity (2016, unknown): “managerial overconfidence is more widely explored in the context of other areas of corporate decision-making and activity, such as compensation contracts and capital budgeting (Gervais et al. (2011)), financial misreporting (Schrand and Zechman (2012)); earnings forecasts (Hribar and Yang (2013)), C”