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Heizer, Tobias; Rettig, Laura R. (2020): Top management team optimism and its influence on firms' financing and investment decisions. In: Review of Financial Economics, Vol. 38, No. 4: pp. 601-622
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Abstract

This paper examines the influence of optimism among the top management team members on corporate investment and financing decisions. We develop an optimism measure based on voluntary insider transactions that is applicable to all officers and directors of a firm. Our results suggest that corporate policies are not solely influenced by an individual CEO's optimism, but rather driven by the attitudes of top management team members as a group. In fact, we find that the impact of CEO optimism on corporate investment and financing decisions depends on the optimism of other officers and/or directors. In contrast, if several other officers and/or directors, apart from the CEO, are optimistic, their influence is significant, independent of CEO optimism. Our analyses include all public US companies within the Compustat universe for a time span of 20 years.