Campbell, T. Colin; Gallmeyer, Michael; Johnson, Shane A.; … - In: Journal of Financial Economics 101 (2011) 3, pp. 695-712
We show theoretically that optimism can lead a risk-averse Chief Executive Officer (CEO) to choose the first-best investment level that maximizes shareholder value. Optimism below (above) the interior optimum leads the CEO to underinvest (overinvest). Hence, if boards of directors act in the...
