Executive overconfidence, corporate investment, and institutional ownership: Evidence from Vietnam

Abstract

Using Vietnamese data, we study how net-buyer executives (previously thought to identify overconfidence) affect corporate investment. We find that both net-buyer CEOs and net-buyer board chairs tend to increase corporate investment, which is mitigated by both domestic and state institutional ownership, and exacerbated by foreign institutional ownership. We find that net-buyer CEOs subsequently increase firm value, so they seem to have justified confidence in their ability to generate value, whereas net-buyer board chairs subsequently decrease firm value, displaying genuine overconfidence. As this distinction does not hold for dual board chair-CEOs, it could arise from information asymmetry between CEOs and chairs.