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CEO experience, managerial overconfidence and investment efficiency: Evidence from a natural experiment in China

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  • Hao, Ying
  • Li, Junyi
  • Cui, Xuegang
  • Ni, Juan

Abstract

We examine how the early lives and career experiences of CEOs impact corporate investment efficiency in the Chinese economy. We identify two extraordinary events that are likely to underlie CEOs' formative experiences: the economic reforms that commenced in 1978 and CEOs' prior career experiences. We show that CEOs who experienced the economic reforms and opening-up in their early adult lives tend to be more confident and overinvest more than those who grew up during the planned economy era. Furthermore, CEOs whose entire careers have been in the business sector exhibit greater levels of confidence and overinvestment than those with long-term public administration experience prior to their service as corporate executives.

Suggested Citation

  • Hao, Ying & Li, Junyi & Cui, Xuegang & Ni, Juan, 2023. "CEO experience, managerial overconfidence and investment efficiency: Evidence from a natural experiment in China," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:pacfin:v:80:y:2023:i:c:s0927538x2300149x
    DOI: 10.1016/j.pacfin.2023.102083
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    More about this item

    Keywords

    Career experience; Early-life experiences; Investment efficiency; Managerial overconfidence; Reform and opening up policy;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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