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CEO overconfidence and the value of corporate cash holdings

Aktas, Nihat; Louca, Christodoulos; Petmezas, Dimitris

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Nihat Aktas

Christodoulos Louca


Cash holding is on average more valuable when firms are managed by overconfident CEOs. Economically, having an overconfident CEO on board is associated with an increase of $0.28 in the value of $1.00 cash holding. The positive effect of CEO overconfidence on the value of cash concentrates among firms that are more likely to suffer from the underinvestment problem (i.e., financially constrained firms which exhibit high growth opportunities). In addition, CEO overconfidence affects negatively the value of cash in firms that are financially unconstrained, a finding which is consistent with the overinvestment hypothesis. The results are robust to various tests and alternative explanations.


Aktas, N., Louca, C., & Petmezas, D. (2019). CEO overconfidence and the value of corporate cash holdings. Journal of Corporate Finance, 54, 85-106.

Journal Article Type Article
Acceptance Date Nov 26, 2018
Online Publication Date Dec 10, 2018
Publication Date 2019-02
Deposit Date Jul 29, 2020
Publicly Available Date Jul 29, 2020
Journal Journal of Corporate Finance
Print ISSN 0929-1199
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 54
Pages 85-106
Public URL
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