GSBS6001, Sem 2, Sydney: Annotated Bibliography on Overconfidence

This assignment is an annotated bibliography analyzing the concept of management overconfidence. The paper summarizes key articles, including Russo & Schoemaker (1992) and Kramer & Liao (2016), classifying them as either conceptual or empirical. The assignment explores the causes and consequences of overconfidence, focusing on its impact on decision-making, CEO behavior, and financial markets. It discusses the role of metaknowledge, cognitive biases, and the importance of accountability and feedback. The bibliography also provides practical insights for managers, highlighting the need to balance confidence with realism, improve information processes, and foster open communication within organizations. The paper also identifies weaknesses and limitations of the research, such as the reliance on secondary data and the absence of hypothesis formation. Overall, this assignment provides a comprehensive overview of overconfidence in management and its implications for business strategy and leadership.

1
GSBS6001 Assignment 2 – Annotated Bibliography
ANNOTATED BIBLIOGRAPHY TEMPLATE(FOR CONCEPTUAL PAPER)
This template and instruction should be used for GSBS6001 Sydney Only
ARTICLE SUMMARY
Reference
Russo, J. E., & Schoemaker, P. J. (1992). Managing overconfidence. Sloan management
review, 33(2), 7.
Article Classification
Conceptual paper
Journal Ranking
<Search for journal ranking from ABDC quality journal listing and identify whether the journal is A*, A, B, C
or unranked>
Purpose of the Article
This article discusses about the cause and costs of overconfidence of the managers
along with the remedies for being overconfident. The introductory part of the research speaks
about the balance between confidence and realism and that people have often been found
indefensibly certain of their beliefs. The authors have pointed out that it is known to the
managers about the accuracy level of some of the decisions provided by the colleagues or the
subordinates in sale meetings or anything of that sort. The managers cannot bank on each and
every decision that comes their way because of the accuracy of the same. As per Ahsan,
(2017), the managers have to be tactical in filtering the proper information and understand the
true scenario of the business proceedings and the exactness of who is doing what at the
workplace or market. They cannot go on relying on every bit of information that comes along
their way, they have to be selective and understand on whom they can have their trust on for
believing on the information.
Proposed Conceptual Framework
Decision making can be stated as a procedure through which individuals, a group or
an organization decides on one favored action from among the two or more potential actions
within specified circumstances. As per Hribar & Yang, (2016), empirical researches within

2
GSBS6001 Assignment 2 – Annotated Bibliography
the segment of knowledge management have found that the confidence of managers’ in the
precision of his/her previous knowledge adds to the process of decision making while facing
a situation of complicated nature with imperfect information or within a highly fluctuated
environment. In a situation of unexpected nature having enormously low prospect, a manager
who is overconfident and experienced might lose the competence in calibrating the precision
of the previous knowledge of his/her during the process of decision making.
Over the years managers and philosophers have long been trying in raising
consciousness about the complexity of balancing the factor of confidence with much realism,
yet the outcome of the unsupportable confidence persist to pestilence the business. Managers
generally deal in opinions; they are being barraged with proposals, estimations along with
predictions from the people who genuinely believe them. However, as per Chen et al.,
(2014)experience is of the opinion that managers need to suspect the factor of certainty with
which the beliefs are being stated.
Conclusion
This article went about its business using the secondary data method. This article has made
use of the term metaknowledge those talks about the preselected knowledge of an individual.
This article was more into the general sort taking in the factors like cost, remedies and the
reasons for having overconfidence.
CRITICAL INSIGHT
Research Insight
Russo and Schoemaker have tried to focus on the ways managers require to deal with
the frequently unpredictable opinions they receive at workplace. To the authors the answer
lies in the identification of the beliefs of the people that gets imprecise by deep-seated
overconfidence. Several instances have been provided by the authors to understand generally

3
GSBS6001 Assignment 2 – Annotated Bibliography
what goes wrong for the managers and why they have to suffer at times. The authors have
mentioned about metaknowledge that is been stated as an appreciation on the things known to
that of unknown. According to Koudstaal, Sloof & Van Praag, (2015), metaknowledge has
been able to understand the limitations of the fundamental knowledge that has the ability in
lessening the errors of overconfidence through demonstration of the limitations of the
knowledge. Overconfidence is stated to be something that might let people commit bigger
mistakes than they would have actually in that scenario. It is something that is important to
understand and control as overconfidence has the ability in jeopardizing certain situations at
workplace for which things become uncanny (Ancarani, Di Mauro & D’Urso, 2016). It is
upto the managers in managing it a proper way.
Being confident is one factor and being overconfident is quite another. Researchers
have been able to find the fact that those who are intelligent or think that way is generally
fixed and unalterable tend to be overconfident. Such people have the habit of maintaining
their overconfidence through focusing on the easier parts of the tasks and spending as little
time as feasible on the parts that are harder. Two of the economists at the Washington State
University found that buoyancy has been much significant than the exactness in generating
the followers. The sad conclusion have been that the pundits have had a fake intellect of
confidence as that is what the public craves on in seeking to shun the uncertainty stress. In
other words, for being popular, one needs to be excessively confident. This would be taking
either an amoral cognitive dissension or unawareness.
The authors in the above mentioned article has focused on the professionals
developing a sharper sagacity on the level they know about certain things and that they do
not. In this sense accountability and feedback are two components that prove the existence of
overconfidence. This would take into account the future researches on managing of the
overconfidence though one common mistake taken up by the researchers that is often been

4
GSBS6001 Assignment 2 – Annotated Bibliography
done by the managers is equating learning and experience (Libby & Rennekamp, 2016).
Experience has been stated as inevitable but not in case of learning. It is important for
understanding the cognitive causes in the matter of overconfidence like hindsight, the
confirmation prejudice along with availability and anchoring. The cognitive remedies have
also been provided in this research by the authors for the managers to understand the ways of
improving the thinking by bringing in pertinent considerations that might be unnoticed easily.
Factors like ‘awareness alone’ along with ‘paths to trouble’ would help the existing and
budding managers in understanding the exact things to be done in managing the level of
confidence at workplace (Kraft et al., 2017).
Practical Insight
For the purpose of adapting to the modern conditions of the business it is compulsory
in commonly managing all the activity processes of the enterprise along with the sharing of
the information that is inevitably required within an enterprise. Therefore it is important for
the managers along with the businesses in improving of the processes of businesses and
managing them effectively through the pertinent use of the resources. In quintessence, the
processes of information need to be best described through the explanation of their role along
with the purpose in implementing of the processes of data storage, evaluating the various
processes within the organization (Ifcher & Zarghamee, 2014).
Managers or employees do sometimes be in the unusual position of reporting
concurrently to reporting to two dissimilar managers. Some employees have reported of
encountering this situation with the structure of dual reporting that was intended in helping
them addressing the requirements of two different departments. Different styles of leadership
sometimes creates issues for the decision makers in what to follow and which one to sideline

5
GSBS6001 Assignment 2 – Annotated Bibliography
for the time being, presenting that person with regular challenges to deal with. It is during this
time that employees or junior managers recognize the significance of the decisions in
promoting of the action. Nothing ensue the fact without a decision, learning the ways of
depending on the new team members taking clear decisions. It is important for budding
managers to understand the challenges that everybody faced when the boss generally slows
down the process of decision making. Employees and managers need to learn the significance
of evaluating the decisions from various angles and striving hard in backing a decision with
the help of the evidence.
Other studies have proved the fact that needs of leadership are mainly dependent on
the position of the leader along with the organizational level. The article has focused on
theories focusing on either the top extent of the management that is stated to be generally the
province of the scholars of business, or the lower management level for the discussions on
psychology. There does not exist much research papers on the various levels of the
management other than the top level and the bottom level. Various types of overconfidence
have been tested through the use of the number of methods. it is important to have
appropriate confidence in making or taking of proper decisions which might be risky,
understanding the fact when to seek advice along with information and communicating the
knowledge of one. It has been found that managers do exhibit tendency in expressing
enormous beliefs in their own capacities.
The article under discussion talks about overconfidence being extremely bias for the
managers in many of the industries. It sometimes does affect the behavior existing within the
financial markets, improving on the budgets and time in completing the projects along with
the general planned managerial decision-making development (Andreou et al., 2016). The
article discusses on explaining the higher investment rate during the times of mergers and
acquisitions, where overconfidence can be exhibited by the managers miscalculating the

6
GSBS6001 Assignment 2 – Annotated Bibliography
synergy gains of the process of merger. This might come from the belief that the leadership
skills of the manager are much better than the average. The article speaks about the fact that
the CEOs who are overconfident are in all probabilities more likely in making acquisitions of
lower quality when their firms possess plentiful internal resources. The article takes in the
physiological causes of the overconfidence factor taking in the example of Ford Motor
Company. The authors stated that in dealing with the physiological causes of overconfidence,
it is important in having an awareness of the issue that the organization is facing. Issue needs
to be found for fixing it. It is important in making group judgments better where openness is
encouraged, where people get to know that they would be heard and their suggestions would
be taken into consideration (Kramer & Liao, 2016).
Weaknesses and Limitations
It is important for the managers to exhibit a part of their self-confidence for
functioning in the proper way. It has been stated though too much of confidence can at times
backfire where people can bet on the plans or the projects where a more realistic
advancement would have been rejected. This research has more been a descriptive one,
banking on mainly the secondary sources, and not taking into account any primary research
methods. A primary research helps in providing more accurate results than the secondary
results as secondary results mainly depends on the previous researches conducted by other
scholars where the authenticity of the information sometimes remains questionable (Zhao &
Ziebart, 2017). A formation of the hypothesis would have provided this research more
strength for the future researches. Interviews and questionnaires would have shed more light
on the research as it would have provided the researchers in analyzing the real results.

7
GSBS6001 Assignment 2 – Annotated Bibliography

8
GSBS6001 Assignment 2 – Annotated Bibliography
ANNOTATED BIBLIOGRAPHY TEMPLATE(FOR EMPIRICAL PAPER)
This template and instruction should be used for GSBS6001 Sydney Only
ARTICLE SUMMARY
Reference
Kramer, L. A., & Liao, C. M. (2016). The spillover effects of management overconfidence on
analyst forecasts. Journal of Behavioral and Experimental Finance, 12, 79-92.
Article Classification
Empirical paper
Journal Ranking
<Look for journal ranking from ABDC quality journal listing and identify whether the journal is A*, A, B, C or
unranked>
Purpose of the Article
It has been stated that the overconfidence have been known to overrate their
capability in generating overpay and return factor of the target firms and taking of the
excessive risks. This article discusses about the overconfidence of the CEO that has the
ability in directly affecting the other participants of the market. Firms that possess CEOs of
overconfident nature in all probability issue forecasts of earnings that are stated to be
optimistic related to the earnings of actual nature. Moreover, the firms having overconfident
CEOs have a tendency to have less discrete analyst forecast of earnings. This article have
taken in these findings in demonstrating the behavioral facets of CEOs in shaping of the
environment where other participants of the market along with analysts make significant
decisions related to financial matters.
Research Findings
Managing overconfidence is never easy, especially when those overconfident bunches
of people try and impose their ideas and suggestions on others. Overconfidence is stated to be
quite similar to the other psychological measures that are intricate to operationalise. The
impact of the finance of behavioral nature is being discussed since the psychosomatic aspects
of making decisions. Behavioral Finance makes an attempt in explaining the ways social,

9
GSBS6001 Assignment 2 – Annotated Bibliography
emotional and cognitive factors have been influencing the individuals in decision making.
The primary concept has been that decision makers are generally flat to the cognitive errors.
CRITICAL INSIGHT
Research Insight
The authors have opened discussion within this article as management disclosures
being a significant source of information within the financial markets. Effecting the extent
and unpredictability of the prices of the security is possible through influencing of the beliefs
of the participants of the markets. This article takes in a stronger review of the literature
indicating the fact that overconfidence can present itself as being both excessive sanguinity
concerning the degree of the future performance of the firm and excessive certainty about the
exactitude of their private information.
Even when the management’s forecasts are moderately imprecise, it is improbable
that the analysts would be producing more sort of precise forecasts because of the advantage
of information that managers generally has over the analysts (Meder et al., 2016). It can be
stated that overconfident CEOs have been more acquisitive and have over-invested in the
projects that they have perceived to be less perilous leading to the lessening of the value of
the firm in the long run scenario. It can be stated that the firms having overconfident CEOs
have lower propensity in paying out the dividends along with higher propensity in engaging
into the timing of the market. This study has given birth to overconfidence affecting two
important financial decisions of reporting: the substance of intentional earnings forecasts and
the usage of the flexible accruals.
It is important to understand the fact that why the managers at times fail in meeting
their own forecasts. Firms missing their own forecasts do possess less accounting suppleness,
less experience in forecasting and having acquired exogenous negative shocks. The results

10
GSBS6001 Assignment 2 – Annotated Bibliography
have suggested that the firms committed towards offering forecasts frequency and the
properties.
This article discusses about the factor of over-precision as another form of
overconfidence. It has taken into account various literature from previous scholars that have
discussed about the impact of the behavioral biasness on the corporate decision making
process. It has also taken into account the investigation of the effect of the overconfidence of
CEO that is being captured using the press-based and portfolio-based overconfidence
measures, mergers and acquisitions, announcement of change dividend along with the
forecast of the management earnings (Bayat, Salehnejad & Kawalek, 2016).
The authors have also pointed out on recent studies affecting the overconfidence of
management on the basis of the voluntary disclosures. It has been stated that the manager
who would be overestimating his information quality would in all probabilities be disclosing
more accurate information. This illustrates the fact of the overconfident issue management
regulation with the earnings along with the information revelation. The thought of
overconfidence within finance builds within this research and evaluates whether this
optimistic biasness has any sort of effect on the economic decisions. One of the instances of
research associating the factor of overconfidence to the decision making of corporate
claiming that the managerial hubris as an elucidation for the takeovers of the corporate which
is stated to be as descriptive as the alternative hypothesis like the taxes, inefficient target
management and synergy (Meikle, Tenney & Moore, 2016). An experimental setting is being
set up that illustrates overconfidence affecting the decision in entering into a business
marketplace where success generally depends on the skill of the individuals.
Practical Insight
The author has taken into account a large sample in understanding the relevance of the
topic, taking in the publicly traded US firms and is being restricted to the sample of the firms

11
GSBS6001 Assignment 2 – Annotated Bibliography
measuring the overconfidence factor. The authors have taken in CEO overconfidence
measures based on the factors of decisions related to option holding and financial press. The
data that is being taken into account is based on the facets of the CEO that is age, ownership
of stock, educational background. I/B/E/S unadjusted data s being used and adjust for the
splits of stocks manually using the CRSP Cumulative Adjustment Split Factor from the
CRSP Daily Stock files containing more accurate information concerning the true split date
(Engelen, Neumann & Schwens, 2015).
The authors have also mentioned the measures of overconfidence along with the
analyst forecast data like the portfolio based measures of overconfidence, press based
measure of overconfidence along with measuring the characteristics of analyst forecast.
CEOs have often been classified as being overconfident if they implement options later than
the best date, holding on to their options until the expiration factor or increasing their
holdings of the stock of the company. The research has been able to provide proper
justification on the fact that overconfident CEOs under all circumstances would be overrating
the returns to the investment projects, hence investing more when there is enough sufficiency
of the internal funds. As a result of this, additional cash flows offer a prospect for the
overconfident CEOs in investing closer to their preferred levels. Through this it has also been
found that overconfident CEOs are more covetous and employ in mergers that are more
value-destroying because they overestimate their capability in generating the returns
(Alqatamin, Aribi & Arun, 2017).
In case of the option-based measure, one concern is the potential endogencity with a
model that connects the equity holdings of the CEO to his/her decisions of the corporate. The
second measure is generally been recognized on the perception of the outsiders of the CEO.
CEOs are generally ranked based on the times they have been stated as being confident or
optimistic relative to the times they have been described as cautious, frugal and practical. It

12
GSBS6001 Assignment 2 – Annotated Bibliography
has also been stated that the portfolio-based measures along with the press-based measure of
measure of overconfidence are fairly stumpy indicating the fact that not many of the CEOs
are being categorized as being confident or being overconfident by both the set of measures
(Robinson & Marino, 2015).
The articles also discusses about the relationship between the overconfidence of CEO
and forecasts of the analysts. This segment takes into account the impact of the
overconfidence of CEO based on the three facets of the analyst forecasts which are forecast
optimism, forecast dispersion and absolute forecast error. The authors have gone about
testing of the forecasts of the firms having overconfident CEOs are most likely to be
confident, less dispersed resulting from more precise and positive information.
Weaknesses and Limitations
The sample size taken by the researcher has not been that adequate. This research has
taken into account 429 samples which is stated to be much smaller than the actual or ideal
size that could have been taken for more accuracy within the results of the research. The
sample size has always been a matter of concern for the researcher that is stated to be taken in
smaller size due to constraints in time. Time is another factor that has been the weakness for
the researcher as less time provides less opportunity for the researcher in going for the in-
depth analysis of the research work (Seo, Kim & Sharma, 2017). More addition to the size of
the sample provides more realness and accuracy of the evaluated results on the subject
matter. This study is limited to the management rationality in examining the effect of the
CEO overconfidence on two of the exclusively researched themes in the literature of
accounting which is stated to be forecasts for management earnings and the earnings
management. Evidences have been provided with the notion that managerial overconfidence
apparent itself as the unnecessary optimism about the earnings for the future, leading the
overconfident CEOs in issuing upwardly the forecasts of biased nature. There is obvious

13
GSBS6001 Assignment 2 – Annotated Bibliography
scope for future research within this topic that would be evaluating whether the investors or
the analysts would be taking managerial overconfidence while determining the stock price of
the firm that is being based on the forecasts.

14
GSBS6001 Assignment 2 – Annotated Bibliography
Reference:
Ahsan, M. (2017). The right people at the right time—The place does not matter. Academy of
Management Review, 42(1), 145-148.
Alqatamin, R., Aribi, Z. A., & Arun, T. (2017). The effect of CEOs’ characteristics on
forward-looking information. Journal of Applied Accounting Research, (just-
accepted), 00-00.
Ancarani, A., Di Mauro, C., & D’Urso, D. (2016). Measuring overconfidence in inventory
management decisions. Journal of Purchasing and Supply Management, 22(3), 171-
180.
Andreou, P. C., Doukas, J. A., Koursaros, D., & Louca, C. (2016). CEO overconfidence and
corporate diversification value.
Bayat, A., Salehnejad, R., & Kawalek, P. (2016). Does CEO's Holding of Vested Options
Measure Overconfidence?.
Chen, S. S., Lai, S. M., Liu, C. L., & McVay, S. E. (2014). Overconfident managers and
internal controls.
Engelen, A., Neumann, C., & Schwens, C. (2015). “Of course I can”: The effect of CEO
overconfidence on entrepreneurially oriented firms. Entrepreneurship Theory and
Practice, 39(5), 1137-1160.
Hilary, G., Hsu, C., Segal, B., & Wang, R. (2016). The bright side of managerial over-
optimism. Journal of Accounting and Economics, 62(1), 46-64.
Hribar, P., & Yang, H. (2016). CEO overconfidence and management
forecasting. Contemporary Accounting Research, 33(1), 204-227.
Hsieh, T. S., Bedard, J. C., & Johnstone, K. M. (2014). CEO Overconfidence and Earnings
Management.

15
GSBS6001 Assignment 2 – Annotated Bibliography
Hsu, C., Novoselov, K., & Wang, R. (2014). Can two biases be better than none?
complementarity between CEO overconfidence and accounting conservatism.
Hu, N., Hu, N., Huang, R., Huang, R., Li, X., Li, X., ... & Liu, L. (2017). The impact of
CEOs’ accounting backgrounds on earnings management and conservatism. Journal
of Centrum Cathedra, 10(1), 4-24.
Ifcher, J., & Zarghamee, H. (2014). Affect and overconfidence: A laboratory
investigation. Journal of Neuroscience, Psychology, and Economics, 7(3), 125.
Koudstaal, M., Sloof, R., & Van Praag, M. (2015). Are Entrepreneurs more Optimistic and
Overconfident than Managers and Employees?.
Kraft, P. S., Back, P., Lampe, J. O., & Bausch, A. (2017, January). Overconfidence and Risk
Behavior: The Mediating Role of Risk Propensity and Risk Perception. In Academy of
Management Proceedings (Vol. 2017, No. 1, p. 15137). Academy of Management.
Kramer, L. A., & Liao, C. M. (2016). The spillover effects of management overconfidence on
analyst forecasts. Journal of Behavioral and Experimental Finance, 12, 79-92.
Libby, R., & Rennekamp, K. M. (2016). Experienced financial managers' views of the
relationships among self-serving attribution bias, overconfidence, and the issuance of
management forecasts: A replication. Journal of Financial Reporting, 1(1), 131-136.
Malmendier, U., & Tate, G. (2015). Behavioral CEOs: The role of managerial
overconfidence. The Journal of Economic Perspectives, 29(4), 37-60.
Meder, A., Schwartz, S., Spires, E., & Young, R. (2016). Subjective Beliefs and Management
Control: A User’s Guide and a Model Extension.
Meikle, N. L., Tenney, E. R., & Moore, D. A. (2016). Overconfidence at work: Does
overconfidence survive the checks and balances of organizational life?. Research in
Organizational Behavior, 36, 121-134.

16
GSBS6001 Assignment 2 – Annotated Bibliography
Robinson, A. T., & Marino, L. D. (2015). Overconfidence and risk perceptions: do they really
matter for venture creation decisions?. International Entrepreneurship and
Management Journal, 11(1), 149-168.
Seo, K., Kim, E. E. K., & Sharma, A. (2017). Examining the determinants of long-term debt
in the US restaurant industry: does CEO overconfidence affect debt maturity
decisions?. International Journal of Contemporary Hospitality Management, 29(5).
Zhao, Q., & Ziebart, D. A. (2017). Consequences of CEO Overconfidence. Accounting and
Finance Research, 6(2), 94.