Details

Autor(en) / Beteiligte

• Cheng, Jiang
• Fung, Hung-Gay
• Lin, Tzu-Ting
• Wen, Min-Ming

Titel

CEO optimism and the use of credit default swaps: evidence from the US life insurance industry

Ist Teil von

• Review of quantitative finance and accounting, 2024-07, Vol.63 (1), p.169-194

Ort / Verlag

New York: Springer US

Erscheinungsjahr

2024

Quelle

Alma/SFX Local Collection

Beschreibungen/Notizen

• In this study, we examine the effects of the degree of CEO optimism on their risk-taking behaviors and on firm value and show that CEOs with low overconfidence tend to take on more risk (in terms of tail risk) and have a lower Tobin’s Q than companies whose CEOs have moderate or high overconfidence. To do so, we use a sample of life insurance companies divided into three subsamples, based on the degree of CEO overconfidence (OC): low OC, moderate OC, and high OC. Our additional analyses indicate that, before the 2008 global financial crisis, all three OC subsamples have a positive effect on Tobin’s Q from the net credit default swap (CDS) sell positions. But, after the financial crisis, all the three OC groups use CDS to reduce firms’ risk-taking behavior, rather than to increase firm value.