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Effects of managerial overconfidence on analyst recommendations

Author

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  • Mei-Chen Lin

    (National Taipei University)

  • Po-Hsin Ho

    (National Taipei University)

  • Hsiang-Lin Chih

    (National Taipei University)

Abstract

This study investigates the relation between managerial overconfidence and analyst recommendations. The empirical finding shows that analysts are less likely to issue upgrade recommendations for firms managed by overconfident CEOs. Similarly, analysts spend a longer time to upgrade stocks associated with overconfident CEOs. The effect of CEO overconfidence on recommendation revisions is non-monotonic. Analysts are more reluctant to upgrade firms with highly-overconfident CEOs. More experienced analysts are less susceptible to managerial overconfidence. Moreover, investors exhibit stronger response to recommendations for firms with overconfident CEOs.

Suggested Citation

  • Mei-Chen Lin & Po-Hsin Ho & Hsiang-Lin Chih, 2019. "Effects of managerial overconfidence on analyst recommendations," Review of Quantitative Finance and Accounting, Springer, vol. 53(1), pages 73-99, July.
    • Handle: RePEc:kap:rqfnac:v:53:y:2019:i:1:d:10.1007_s11156-018-0743-4
    DOI: 10.1007/s11156-018-0743-4
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    Cited by:

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    3. Jennifer Kunz & Lara Sonnenholzner, 2023. "Managerial overconfidence: promoter of or obstacle to organizational resilience?," Review of Managerial Science, Springer, vol. 17(1), pages 67-128, January.
    4. Le, Anh-Tuan & Doan, Anh-Tuan & Lin, Kun-Li, 2024. "CEO overconfidence and the informativeness of bank stock prices," International Review of Financial Analysis, Elsevier, vol. 94(C).
    5. Dong, Liang & Kot, Hung Wan & Lam, Keith S.K. & Liu, Ming, 2022. "Co-skewness and expected return: Evidence from international stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 76(C).

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    More about this item

    Keywords

    Analyst recommendation; Managerial overconfidence; Analyst experience;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G40 - Financial Economics - - Behavioral Finance - - - General

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