
The study revealed that 17% of CEOs are ultimately not suited to their firm, largely thanks to the shortage of leader-type CEOs in the market.The greatest difference in the supply and demand of this type of CEO exists in low- and middle- income countries. According to the researchers, this poor distribution could account for up to 13% of cross-country differences in labour productivity. Companies often evaluate the success of their current business strategy through feedback in the form of their firm’s current financial results relative to their own previous performance or that of other market participants in the same industry and adapt their decisions accordingly.
According to the research, overconfident CEOs assess the financial situation of their company more optimistically than their colleagues and react much weaker to external and internal feedback. That can stand in the way of rational decisions, the WU researchers report in the Strategic Management Journal.“That means: Although the financial situation in the company is possibly very bad and would require a change in the company’s strategy, these CEOs interpret the precarious situation much more positively and only react with a change when it might already be too late – which can of course have devastating consequences for the company,” Schumacher said. In their quantitative study, the study authors examined all companies in the S & P1500 Index, which includes the 1,500 largest American listed companies, in the period from 1992 to 2014. The study also revealed that female CEOs were less likely to have an overly confident view of both their company’s financial situation, and their own abilities. Christian Schumacher, Assistant Professor in the Department of Global Business and Trade at Vienna University of Economics and Business, added: “Women are less often overconfident about their own abilities, which is also reflected in our study. This more accurate assessment means that female CEOS are much more sensitive to different types of feedback about their companies’ current business strategy.”
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