Abstract
An open research question that is prominent in the strategic management literature is whether CEO overconfidence - one of the most prevalent decision- making biases - has positive or negative overall effect on firm performance. Through research synthesis and theory-building efforts, we shed light on this question in three ways. First, through a meta-analytical research synthesis of all available studies on the performance effects of CEO overconfidence, we find evidence indicating that CEO overconfidence has as a small but statistically significant positive effect on firm performance. Second, we find that the effect size varies greatly across studies, and propose that these differences can be explained by considering the moderating role of managerial discretion. In particular, we find that the positive relationship between CEO overconfidence and firm performance is stronger when managerial discretion at organization and country level is high. Third, we conclude by discussing theoretical and practical implications of our findings and by providing future research avenues for CEO overconfidence research.
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