CEO Overconfidence and Long-Term Performance Following R&D Increases

Sheng Syan Chen, Keng Yu Ho, Po Hsin Ho

Research output: Contribution to journalArticlepeer-review

48 Scopus citations


We examine the relation between Chief Executive Officer (CEO) overconfidence and significant increases in research and development (R&D) expenditures. Although prior studies reveal a significantly positive market reaction to increases in R&D expenditures in both the long and short run, we find that long-run stock performance is positive only for firms whose CEOs are not overconfident. Our findings, which may be attributable to overinvestment and the overestimation of future cash flows, imply that R&D resulting from overconfident behavior does not provide any value to firms.

Original languageEnglish
Pages (from-to)245-269
Number of pages25
JournalFinancial Management
Issue number2
StatePublished - 2014


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