New product strategies and firm performance: CEO optimism

Abstract We examine the role of CEO optimism in explaining firm performance associated with new product introductions. New product introducing firms with high levels of CEO optimism experience better announcement-period abnormal returns and long-term stock performance than introducers with moderate or low levels of CEO optimism. Changes in abnormal operating performance following new product announcements are also more favorable for firms with high-optimism CEOs than for firms with moderate-optimism or low-optimism CEOs. The results hold after controlling for other potential explanatory factors and accounting for endogeneity. The evidence highlights the importance of CEO optimism in assessing the valuation effect of corporate product strategies.