Are founder CEOs more overconfident than professional CEOs? Evidence from S&P 1500 companies

Research summary: We provide evidence that founder chief executive officers (CEOs) of large SP they are also more likely to perceive their firms to be undervalued, as implied by their option-exercise behavior. We provide evidence that, to date, investors appear unaware of this “overconfidence bias” among founders. Managerial summary: This article helps to explain why firms managed by founder chief executive officers (CEOs) behave differently from those managed by professional CEOs. We study a sample of S&P 1500 firms and find strong evidence that founder CEOs are more overconfident than professional CEOs. To date, investors appear unaware of this overconfidence bias among founders. Our study should help firm stakeholders, including investors, employees, suppliers, and customers, put the statements and actions of founder CEOs in perspective. Our study should also help members of corporate boards make more informed decisions about whether to retain (or bring back) founder CEOs or hire professional CEOs. Copyright © 2016 John Wiley & Sons, Ltd.