Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 2, 2022 erstellt
Description:
Through close interactions with their CEO and CFO, independent directors as well as subordinate executives can assess the overconfidence of their CEO and CFO. We show that independent directors and subordinate executives trade on this assessment, albeit differently. Independent directors of a firm with an overconfident CEO and CFO sell their stock holdings, whereas subordinate executives do not do so significantly. These trades are not driven by firm characteristics or earnings surprise, refuting an alternative explanation that insiders simply trade on private information about corporate performance. The volume of related trades increases with the length of tenure the independent directors and subordinate executives share with their CEO and CFO. Independent directors sell more in response to firm-level overconfidence if they share longer tenure with their CEO and CFO. In contrast, subordinate executives sell less in response to firm-level overconfidence if they share longer tenure with their CEO and CFO. Our findings suggest that, independent directors—and not subordinate executives—can curb overconfidence of their CEO or CFO