Empirical study reveals personal trading biases spill over into corporate decisions among chief executives, suggesting that individual heuristics drive firm-level outcomes.
We examine whether managerial cognitive heuristics spill over from personal to corporate decisions. We identify “anchoring CEOs” who anchor on the 52-week high in personal stock trading and show that this behavior extends to corporate financial decisions. These CEOs are more likely to issue seasoned equity offerings near the 52-week high and place greater weight on the target’s 52-week high in acquisition pricing, with the latter associated with negative abnormal returns. The effect is stronger under competitive pressure and uncertainty but weaker with stronger governance and CEO experience. Our findings highlight cross-domain persistence in managerial heuristics and the role of governance in mitigating behavioral distortions. (JEL G14, G32, G34)
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Li et al. (2026) studied this question.
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