CEO Overconfidence or Private Information? Evidence from U.S. Property-Liability Insurance Companies

[[abstract]]This paper uses conventional measures of CEO overconfidence: option holdings-based and net stock purchase-based measures to examine the impact of CEOs who hold firm-specific risk on insurer’s risk-taking and firm performance. We focus on the insurance industry because using reinsurance demand as a proxy for risk-taking provides a precise measurement of CEO’s risk-taking. We find that the two CEO overconfidence measures are negatively associated with insurer’s risk-taking and positively related to firm performance. Our findings suggest that it may not be CEO overconfidence, but rather the private information and the intention to control the company’s risk that drive our results.[[notice]]補正完