Overconfidence and Initial Public Offering (IPO) decisions: a behavioural corporate finance survey among polish managers

Objective. The aim of this study was to examine whether corporate managers, i.e. chief executive officers (CEOs) and chief financial officers (CFOs) of companies listed at the main market of the Warsaw Stock Exchange (WSE) and its alternative platform New Connect (NC) are susceptible to overconfidence bias (in following forms: above-the-average effect, calibration bias, illusion of control, excessive optimism) and whether their overconfidence is related to their managerial practices in the going public process (Initial Public Offering - IPO). Methods. In order to identify the existence of overconfidence bias and to investigate IPO managerial practices among the study participants a survey methodology was employed. We managed to obtain fully filled surveys from 163 corporate managers. Results. Polish corporate managers displayed all aforementioned elements of overconfidence bias and also revealed several irrational managerial practices connected to IPO decisions. Importantly, we observed the link between managerial overconfidence and some elements of IPO practices among our participants. Conclusions. It seems that even well-educated corporate managers, with a high level of expertise and representing the publicly listed companies are susceptible to overconfidence bias, which may be related to their irrational managerial practices in the area of IPO decisions. Further research on behavioral corporate finance is needed to better understand psychological obstacles that face managers in their everyday decisions in company’s value creation.