Next Article in Journal
Using Goal-Programming to Model the Effect of Stakeholder Determined Policy and Industry Changes on the Future Management of and Ecosystem Services Provision by Ireland’s Western Peatland Forests
Previous Article in Journal
Discerning and Addressing Environmental Failures in Policy Scenarios Using Planning Support System (PSS) Technologies
Article Menu
Issue 1 (January) cover image

Export Article

Open AccessArticle
Sustainability 2017, 9(1), 14;

CEO Overconfidence, Leadership Ethics, and Institutional Investors

College of Art, Kookmin University, 02707 Seoul, Korea
School of Business Administration, Chung-Ang University, 06974 Seoul, Korea
Author to whom correspondence should be addressed.
Academic Editor: Barbara Aquilani
Received: 7 November 2016 / Revised: 12 December 2016 / Accepted: 20 December 2016 / Published: 23 December 2016
(This article belongs to the Section Economic, Business and Management Aspects of Sustainability)
Full-Text   |   PDF [292 KB, uploaded 23 December 2016]


This paper explores the influence of institutional investors’ external monitoring on CEOs’ overconfidence. We particularly examine institutional monitoring’s influence on overinvestments by overconfident CEOs and the likelihood of appointing these overconfident CEOs to firms. The results indicate that firms with overconfident CEOs have more overinvestment, as the CEOs tend to be overly optimistic about investment opportunities and are more likely to act on them. The findings, more importantly, show that institutional monitoring mechanisms attenuate overconfident CEOs’ overinvestment. However, we find that institutional monitoring is only significant when long-term and/or large institutional investors hold the firms’ shares. We also discover that investors’ institutional monitoring not only actively reduces a CEO’s overinvestments, but also negatively influences the appointment of overconfident CEOs. Overall, our study provides insights into institutional monitoring’s role in corporate governance as an effective means of preventing value-destroying behaviors by an overconfident leader and cultivating an ethical business philosophy. View Full-Text
Keywords: leadership ethics; CEO overconfidence; corporate governance; institutional monitoring; overinvestment leadership ethics; CEO overconfidence; corporate governance; institutional monitoring; overinvestment
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).

Share & Cite This Article

MDPI and ACS Style

Park, J.; Chung, C.Y. CEO Overconfidence, Leadership Ethics, and Institutional Investors. Sustainability 2017, 9, 14.

Show more citation formats Show less citations formats

Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Related Articles

Article Metrics

Article Access Statistics



[Return to top]
Sustainability EISSN 2071-1050 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top