Do overconfident CEOs face a disadvantage in the managerial job market?

Abstract

This study finds that overconfidence increases the chances of job market success for CEOs. By accounting for various factors such as firm and CEO characteristics, we show that overconfident CEOs not only have a greater probability of becoming the outside successors in a new company following their turnover, but they also spend less time searching for such opportunities than their non-overconfident peers. The effects of overconfidence on job market success are mainly observed in cases of voluntary turnover, where overconfident CEOs tend to secure new positions in larger companies in the same industry. Additionally, overconfident CEOs are more likely to improve the performance of these new firms after assuming the leadership role. Overall, this study provides empirical evidence on how overconfident CEOs are valued by the managerial job market.