Shocks to CEO overconfidence and the deflation of hubris in acquisitions

CEOs become less overconfident when other CEOs to whom they are connected are fired unexpectedly, and this reduces hubris in corporate acquisitions. The reduction in overconfidence following this shock is reflected in our finding that CEOs are less likely to hold vested deep-in-the-money options in the year after which they experience this network turnover shock. In the year following unexpected turnover in their networks, CEOs make fewer acquisitions, and the ones they make are of higher quality. Network turnover shocks thus appear to cause temporal variation in CEO overconfidence that has significant effects on a major corporate policy.