We develop a model of the effect of CEO overconfidence on dividend policy and empirically examine many of its predictions. Consistent with our main prediction, we find that the level of dividend payout is lower in firms managed by overconfident CEOs. We document that this reduction in dividends...

We develop a dynamic model of corporate cash holdings that incorporates CEO beliefs.An optimistic CEO views external financing as excessively costly but expects this cost tomoderate over time. The optimistic CEO thus delays external financing while funding currentinvestments with existing cash...

We develop a model of the effect of CEO overconfidence on dividend policy and empirically examine its central predictions. Consistent with our main prediction, we find that the level of dividend payout is lower in firms managed by overconfident CEOs. We document that this reduction in dividends...