The Effect of CEO Overconfidence on Corporate Disclosures Amid a Pervasive Shock: Evidence From the COVID-19 Pandemic

We investigate how CEO overconfidence affect firms' voluntary reporting of COVID-19 exposure using text-based measures of firm-level COVID-19 pandemic exposure reports. Our analysis of 3038 firm-quarter earnings conference calls in 2020 reveals that overconfident CEOs express a less pessimistic tone, compared to non-overconfident CEOs when discussing their firms' exposure to the pandemic, and these results hold under various robustness checks. Additionally, a more pronounced negative pandemic exposure sentiment predicts weaker subsequent operating performance among non-overconfident and overconfident CEOs alike. While increased negative sentiment leads to worse stock performance among firms with non-overconfident CEOs, this predictive power is significantly weakened for overconfident CEOs. Our findings provide insights into how CEO overconfidence can affect firms' disclosure behavior during a crisis and contribute to the literature on CEO overconfidence and pandemic-related disclosures.