Managerial duties and managerial biases

Ulrike Malmendier, Vincenzo Pezone, Hui Zheng

Research output: Contribution to journalArticleScientificpeer-review


Much of the evidence on managerial biases in corporate nance focuses on the CEO and, in particular, CEO overcondence. This singular focus can lead to misattribution as it ignores the roles of other managers who are responsible for a given corporate outcome. We evaluate the inuence of the CFO and other C-suite executives as compared with the CEO. Mirroring the widely used Longholder CEO measure of CEO overcondence, we construct Longholder CFO and Longholder Other measures. For nancing decisions, we nd that CEO overcondence becomes an insignicant predictor of most decisions when included jointly with the CFO proxy, whereas CFO overcondence has strong predictive power. The reverse holds for nonnancing decisions: CEO beliefs predict the risk and return of investment projects and, thus, their cost of nancing as well as acquisitions. Other C-suite managers??? overcondence is not signicant in either of these two realms. CEO overcondence does remain signicant even for nancing decisions in the subsample of rms with ???powerful??? (entrenched) CEOs. We also show that overcondent CEOs tend to hire overcondent CFOs, which generates a multiplier effect and explains the misattribution to the CEO in analyses that do not account for the roles of other managers. Our results imply that analyses of managerial biases need to identify the dominant decision makers and account for their respective inuence.
Original languageEnglish
Pages (from-to)3174-3201
JournalManagement Science
Issue number6
Publication statusPublished - Jun 2023


  • behavior and behavioral decisin making
  • finance
  • corporate finance
  • management
  • CFO overconfindence


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