Managerial optimism and corporate investment behavior

Abstract

This study aims to analyze if managerial optimism affects corporate investment behavior. We measure managerial optimism by directly surveying CFOs and executives responsible for corporate investments of listed companies in Japan. We show that capital investment is higher when managers are optimistic. When we combine our survey data of Japanese managers with comparable cross-country data, we find that companies located in countries with highly optimistic managers invest more actively. This implies that managerial optimism not only partly explains differences of corporate behaviors in a country, but also those among countries.