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CEO Self-Attribution Bias: Self-Referencing Language Impacts Stock Performance

In their research paper, the researchers investigated the impact of self-serving attribution bias (SAB) among CEOs. SAB is a type of misattribution bias in which CEOs attribute the success of their company to their own abilities and blame any failures on external factors like bad luck or the economy.

The researchers analyzed transcripts of CEO interviews on CNBC and found that the stock market response to interviews of CEOs with self-referencing behavior was negative. They also discovered that CEOs with SAB were more likely to be fired, especially if the governance was stronger, and were more sensitive to performance.

Furthermore, the researchers found that the stock market response to the announcement of forced turnovers of CEOs with SAB was significantly more positive, up to 9.7% over the event window of [-1,1] days.

While the negative tone of interviewing journalists increased the likelihood of forced CEO turnover and turnover-performance sensitivity, the correlation between turnover and SAB was robust. This research has important implications for companies and investors, highlighting the importance of unbiased attributions of success and failure in the evaluation of CEO performance.


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