PDG Hubris et entreprise prise de risque en Chine: le rôle modérateur de la discrétion de gestion (doucment en anglais)

CEO HUBRIS AND FIRM RISK TAKING IN CHINA: THE

MODERATING ROLE OF MANAGERIAL DISCRETION

JIATAO LI

Hong Kong University of Science and Technology

YI TANG

Hong Kong Polytechnic University

This study linked CEO hubris to firm risk taking and examined the moderating role of

managerial discretion in this relationship. Drawing on upper echelons theory and

behavioral decision theory, we developed and tested hypotheses using original survey

data from 2,790 CEOs of diverse manufacturing firms in China. The positive relationship

between CEO hubris and firm risk taking was found to be stronger when CEO

managerial discretion was stronger: when a firm faced munificent but complex markets;

had less inertia and more intangible resources; had a CEO who also chaired its

board; and had a CEO who was not politically appointed.

CEO hubris is generally defined as a CEO’s exaggerated

self-confidence or pride (Hayward & Hambrick,

1997; Hiller & Hambrick, 2005; Kahneman &

Tversky, 1995). Prior research has studied the impacts

of CEO hubris or overconfidence on firm decisions

and outcomes including acquisition premiums

(Hayward & Hambrick, 1997), investment

distortion (Malmendier & Tate, 2005), and venture

failure (Hayward, Shepherd, & Griffin, 2006). The

findings generally suggest that firms with overconfident

CEOs pay higher premiums (Hayward &

Hambrick, 1997), rely on internal rather than external

financing (Malmendier & Tate, 2005), miss their

own forecasts of earnings (Hribar & Yang, 2006),

and undertake more value-destroying mergers

(Malmendier & Tate, 2006).

However, except for very few efforts (e.g., Simon

& Houghton, 2003), previous research has not paid

adequate attention to the relationship between CEO

hubris and firm risk taking. Risk taking is fundamental

to decision making and has important implications

for firm performance and survival (Bromiley,

1991; Sanders & Hambrick, 2007; Shapira,

1995). Firm risk taking has previously been examined

in terms of performance feedback (Greve,

1998,

...