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CEO self-promotion and firm risk profile

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dc.contributor Aalto-yliopisto fi
dc.contributor Aalto University en
dc.contributor.author Yli-Koski, Kalle
dc.date.accessioned 2016-08-16T11:35:50Z
dc.date.available 2016-08-16T11:35:50Z
dc.date.issued 2014
dc.identifier.uri https://aaltodoc.aalto.fi/handle/123456789/21362
dc.description.abstract PURPOSE OF THE STUDY The purpose of this thesis is to study whether highly overconfident or hubristic CEOs are randomly distributed across firms, or whether they are more often promoted in those companies where their optimistically biased beliefs could be expected to be relatively most useful. Previous studies have presented evidence of a number of ways in which overconfidence causes decision-making to deviate from rational first-best policies. I study the relationship between firm-specific risk prior to CEO selection and the level of hubris indicated by the eventual appointee specifically in their self-promotion tendencies. In this way, I add to the strand of literature that suggests CEO hubris would be more common in firms with a high degree of firm-specific risk. DATA AND METHODOLOGY I study a sample of 191 randomly selected CEOs who, according to data from Standard & Poor's Execucomp, were promoted to lead US-based public companies in 1991-2009. After extensive background checks, this sample excludes founder-entrepreneurs, heirs and individual investors whose selection is unlikely to represent a competitive CEO contest. The association or lack thereof between CEO hubris and idiosyncratic risk is assessed by employing the prominence of a CEO's photograph in annual reports immediately after promotion as a proxy for overconfidence and regressing it on idiosyncratic risk measures that pre-CEO selection stock market data from CRSP yields. The annual reports are collected from Thomson Financial Worldscope. FINDINGS OF THE STUDY High idiosyncratic risk during the five years prior to CEO selection does have a borderline significant statistical relationship with the level of the appointed CEO's hubristic tendencies. This finding is new, although the robustness of its significance is much lower when time effects are controlled for. Also, the statistical association is detected assuming major variations in a company's idiosyncratic vs. systematic risk. Therefore the magnitude of the risk effect cannot be considered very meaningful at least in the scope of this study, and call for further research. en
dc.format.extent 52
dc.language.iso en en
dc.title CEO self-promotion and firm risk profile en
dc.type G2 Pro gradu, diplomityö fi
dc.contributor.school Kauppakorkeakoulu fi
dc.contributor.school School of Business en
dc.contributor.department Rahoituksen laitos fi
dc.contributor.department Department of Finance en
dc.subject.keyword CEO personality
dc.subject.keyword hubris
dc.subject.keyword idiosyncratic risk
dc.identifier.urn URN:NBN:fi:aalto-201609083576
dc.type.dcmitype text en
dc.programme.major Rahoitus fi
dc.programme.major Finance en
dc.type.ontasot Pro gradu tutkielma fi
dc.type.ontasot Master's thesis en
dc.subject.helecon rahoitus
dc.subject.helecon financing
dc.subject.helecon yritykset
dc.subject.helecon companies
dc.subject.helecon riski
dc.subject.helecon risk
dc.subject.helecon johtajat
dc.subject.helecon managers
dc.subject.helecon käyttäytyminen
dc.subject.helecon behaviour
dc.subject.helecon psykologia
dc.subject.helecon psychology
dc.ethesisid 14540
dc.date.dateaccepted 2014-12-01
dc.location P1 I
local.aalto.openaccess no
local.aalto.idthes 14540

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