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Effects of CEO and COO overconfidence on the firm's inventory leanness

Bowon Kim (College of Business, Korea Advanced Institute of Science and Technology (KAIST), Seoul, Republic of Korea)
Jaeseog Na (Business Administration, Duksung Women's University, Seoul, Republic of Korea)

Journal of Manufacturing Technology Management

ISSN: 1741-038X

Article publication date: 17 August 2021

Issue publication date: 3 January 2022




This study examines whether the behavioral attributes, such as overconfidence, of chief executive officers (CEO) and chief operating officers (COO) affect firm's inventory leanness. If they do, how are they interacting with each other? Moreover, incorporating market competition into the analysis, this study explores how the competition moderates the relationship between managerial overconfidence and inventory leanness.


Using a large panel data of US manufacturing firms between 1998 and 2015, this study measures top managers' overconfident characteristics using stock option information. Then, a panel regression analysis is adopted to test the effects of managerial overconfidence on inventory leanness. Moreover, a moderation model is applied to investigate the interaction effects of market competition.


Firms with overconfident COOs (CEOs), other circumstances being equal, increase (decrease) the inventory leanness as the market becomes more competitive.

Practical implications

The study suggests that firms should understand top managers' behavioral characteristics to manage inventory efficiently. Collectively, CEOs (COOs) tend to increase (decrease) inventory levels due to their overconfidence as the market gets competitive. Firms should establish a systematic process to be reviewed by diverse stakeholders to deal with managerial overconfidence.


This study is an exploratory study that examines whether and how top management's behavioral attribute relates to a firm's operations performance. It underlines that CEO and COO's overconfident characteristics determine the inventory leanness when market competition is considered. Numerous studies on firm-level strategies emphasized the top managers' overconfidence as a key factor. However, behavioral characteristics at the top management level have rarely been studied in operations management fields. Based on the results, scholars could compare and understand the effects of CEO and COO overconfidence to provide insights into inventory management.



Kim, B. and Na, J. (2022), "Effects of CEO and COO overconfidence on the firm's inventory leanness", Journal of Manufacturing Technology Management, Vol. 33 No. 1, pp. 169-190.



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