Essays on CEO overconfidence

This study contains two chapters. In the first chapter, I examine the effect of CEO overconfidence on turnover abnormal returns. Previous research shows that overconfident CEOs follow pecking order behavior, engage in overinvestment and make value destroying acquisitions. I argue that CEO overconfidence can play an important role in explaining both a firm's and its immediate competitor's abnormal stock returns in the event of a CEO turnover. I analyze the abnormal returns of S&P 500 firms and their competitors when CEO turnover takes place within a firm, and find that overconfidence level of a newly appointed CEO has a significant negative impact on firm's stock price and a positive impact on competitor's stock price.;In the second chapter, I argue that CEO overconfidence can play an important role on firm product market performance and analyze whether overconfident CEOs are good or bad for the firm's product market performance. I study the relationship between CEO overconfidence and within-industry sales performance, and my findings show that higher overconfidence levels are associated with better product market performance.