By Barry Oliver, The University of Queensland
Overconfident chief executives tend to lead to less corporate social responsibility in a company, our research shows. The more confident the chief executive, the less their firm invests in activity that has a positive impact on society.
We looked at 2138 firms with 3478 different chief executives from US exchange-listed firms across all industry sectors, and calculated overconfidence by measuring executive compensation. We looked at the share options provided to chief executives: if the chief executive fails to exercise these options (selling them off) it means they are overconfident about their company.