Using an agency theory framework, we examine the effect of managerial overconfidence on the interaction between … different facets of management decision making, which allows us to examine how overconfidence affects the interaction between … adverse selection and moral hazard. We show that overall welfare implications depend on the kind of overconfidence …

between CEO incentive compensation and CEO overconfidence.Design/methodology/approach – This empirical study performs random … and fixed effects regression analysis. It uses option-implied measures of CEO overconfidence. Findings – The authors … high CEO incentive compensation and CEO overconfidence is associated with an increase in corporate risk of approximately 6 …