Executive Overconfidence and Gender: The Effect on Firm Risk-Taking
I study the combined influence of two executive personal characteristics, overconfidence and gender, in two important yet meaningfully distinct contexts: investments in external (M&A) and internal (innovation) risky projects. I find that both the combined treatment of these executive characteristics and the context play a meaningful role in our understanding of executive decision-making. Lower investment in M&A deals by female executives is driven entirely by non-overconfident executives; overconfident female executives do not differ materially from their male counterparts. On the other hand, overconfidence plays a stronger and more pervasive role for female executives in encouraging innovation: overconfident female executives are more likely to innovate than any other executives, regardless of holding the position of CEO or other positions in the C-suite. My findings highlight the importance of working to a holistic understanding of personal characteristics and executive decision-making.