This article originally appeared in Courier Mail, by author Darren Cartwright, on 5 July 2017.
OVERCONFIDENT CEOs who overestimate their abilities could be putting corporations in peril, with a leading Queensland academic comparing them to extreme sport risk-takers.
University of Queensland Associate Professor in Finance Barry Oliver knows a thing or two about the perils of being overconfident in the wrong situations - he was a competitive paraglider pilot for 10 years.
Much like the extreme sport, Professor Oliver said chief executives who overestimate their own abilities can jeopardise companies, citing the notorious case of US company Enron as a classic example.
“I saw a lot of my friends killed or badly hurt in paragliding accidents, where many of the reasons for the accidents were overconfidence in their ability,” Professor Oliver said.
“There’s evidence that overconfident CEOs increase the chance of securities class action by about 25 per cent, and there’s also evidence that overconfident CEOs are less responsive to corrective feedback in improving management earning forecast accuracy.”
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