A new study asks whether overconfident CEOs are less willing to delegate important tasks. The research matters because many companies work in several countries and sectors, and complex decisions need different experts. A coauthor and finance professor says delegation brings more voices and lets CEOs focus on broader issues.
The researchers looked at 3,690 mergers and acquisitions by public companies from 2000 to 2019. They included only deals worth at least $50 million and at least 1% of the buyer's equity. To measure confidence they used how executives used stock options, and to measure delegation they read press releases and SEC "background of the merger" filings. They found many CEOs were overconfident and these CEOs were less likely to delegate. The effect was stronger for deals in a new industry and for firms with more business segments.
Difficult words
- overconfident — having too much belief in own ability
- delegate — give work or responsibility to another person
- merger — when two companies join and become onemergers
- stock option — right to buy company shares laterstock options
- equity — value of ownership in a company
- press release — official public message from a companypress releases
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Discussion questions
- Do you think a CEO should delegate important tasks? Why or why not?
- Have you worked where a leader did not delegate? How did that feel?
- If a company works in many countries, why might delegation help?
