Overconfidence links: Business edition

Overconfident entrepreneurs are the most likely to fail in new businesses, according to new University of Leicester research.

CEOs develop overconfidence with each merger and acquisition decision, playing up their own role in the successes, thus leading to more deals, many of them bad, according to new University of Iowa research. CEOs are so overconfident they shift their stock portfolios prior to the deals.

Overconfident CFOs “tend to use lower discount rates when valuing cash flows and assign higher values to projects,” according to University of Chicago research. The companies they work for invest more, use more debt, and are less likely to pay shareholder dividends. Seven thousand CFOs were asked, in a survey, to make predictions about the S&P 500 from 1-10 years. Just 38 percent got it right – and they were usually the least confident CFOs.

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