Abstract
This study investigates the relationship between CEO overconfidence and participation in cartels. Using propensity score matching to address potential selection issues, it documents that: (1) CEO overconfidence is positively and significantly associated with cartel involvement; (2) CEO overconfidence precedes and predicts cartel participation, as evidenced by Granger causality analysis; and (3) the likelihood of cartel participation decreases following the departure of an overconfident CEO. These findings suggest that cartel enforcement should focus on the top layer of firm management and on shareholders who provide them incentives. They also suggest that CEO overconfidence could possibly be used as a screen to detect cartels.
Original language | English |
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Publication status | Published - 2024 |