| Summary: | 碩士 === 國立成功大學 === 國際企業研究所碩博士班 === 100 === We argue that managerial overconfidence can account for long-term performance following advertising expenditure increases. Prior studies investigated that whether the advertising itself could be effective to improve the firms’ performance or not. However, Aaker discovered that the firm manager who decides the budget amount for advertising plays an important role on effectiveness of the advertising.
We follow two ways to group our samples into different segments. The one is Holder 67 proposed by Malmndier and Tate to define whether the CEOs are overconfident or not from ExecuComp 1992 to 2011. The other one follows Campell et al. to divide our sample into three categories; they are high optimism, moderate optimism and low optimism. Then, we use calendar time abnormal return method to test the overconfidence hypothesis. We will classify the sample firms which are considered to increase their advertising expenditure by a significant amount. Lastly, we will compare the coefficient between these groups. As we expected, CEOs’ overconfidence is positively related.
After clarifying our samples by Holder 67 as well as exercising options with moneyness between 30% and 100%, we conclude that when advertising intensity is at least 5%, CEOs with overconfidence would improve the firms’ long-term stock performance. However, the variable overconfidence does not have too much impact on overall samples.
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