COO's overconfidence and the firm's inventory performance

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We explore whether and how a behavioural attribute of top manager in charge of operations, i.e. Chief Operating Officer (COO), affects the firm's operations performance. We operationalise COO's overconfidence as the behavioural attribute and use inventory leanness as the operational performance. We collect data from a large number of US manufacturing companies and use option-based proxies to operationalise the managerial overconfidence. Our analysis shows the following. First, the COO's overconfidence significantly increases inventory leanness. We show that the direction of causality in the relationship between the COO's overconfidence and inventory leanness is clear. That is, the COO's overconfidence drives inventory leanness, not the other way around. Second, incorporating market competition into the analysis reveals that as the market becomes more competitive, an overconfident COO tends to reduce inventory and thus increases inventory leanness. That is, as an external factor, the market competition moderates the relationship between COO's overconfidence and the firm's inventory leanness.
Publisher
TAYLOR & FRANCIS LTD
Issue Date
2021-01
Language
English
Article Type
Article
Citation

PRODUCTION PLANNING & CONTROL, v.32, no.1, pp.19 - 33

ISSN
0953-7287
DOI
10.1080/09537287.2019.1711459
URI
http://hdl.handle.net/10203/279568
Appears in Collection
MT-Journal Papers(저널논문)
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