Chen, G., Crossland, C., & Luo, S. (2015) Making the same mistake all over again: CEO overconfidence and corporate resistance to corrective feedback

Question 1

GOAL

Answer 1

Show that CEO overconfidence is bad due to not learning

Question 2

Why do firms ignore ‘constructive feedback’? why do organizations not change when an error occurs? This while others incorporate that feedback into future decisions?

Answer 2

 CEO Overconfidence
 If a firm doesn’t incorporate feedback, this might has to do with the CEO. A prominent cognitive bias: the tendency of individuals to overestimate their abilities

Question 3

Negative association between CEO overconfidence & forecast accuracy improvement: three moderators

Answer 3

• Error valence
• Time horizon
• Managerial discretion
  The more overconfidence, the less likely to learn for performance feedback

Question 4

We found evidence …..

Answer 4

We found evidence supporting our argument that self-attribution biases (Good = my cause, bad = others fault) were strongest, and thus the negative impact of CEO overconfidence on improvement of subsequent forecast accuracy was greatest, when (1) feedback was more ambiguous, proxied by a long time horizon between the date of previous forecast issuance and the release of actual earnings, and (2) there was greater volatility and contextual uncertainty, proxied by a high-discretion environmental context