The Bright Side of Managerial Over-optimism
نویسندگان
چکیده
Human inference and estimation is subject to systematic biases. In particular, there is a long literature showing that overconfidence can lead to sub-optimal decisions. We depart from this research by showing empirically that a) over-optimism is a related but different bias, b) importantly, it can improve firm’s welfare, and more specifically, firms’ profitability and market value, and c) it can emerge dynamically in a rational economic framework. JEL classification: G39 Corresponding author: Gilles Hilary, INSEAD, 1 Ayer Rajah Avenue, 138676 Singapore, Tel: (+65) 6799 5100, [email protected]. We thank Denis Gromb, Kai Wai Hui, Tiphaine Jerome, Kirill Novoselov, Guochang Zhang, and workshop participants at Hong Kong University of Science and Technology, INSEAD, National University of Singapore, and Xiamen University for their helpful comments. Hsu acknowledges financial support from the Hong Kong Research Grants Council (FSGRF13BM02).
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