Do Managers Overreact to Salient Risks? Evidence from Hurricane Strikes - HEC Paris - École des hautes études commerciales de Paris Access content directly
Preprints, Working Papers, ... Year : 2013

Do Managers Overreact to Salient Risks? Evidence from Hurricane Strikes

Abstract

We study how managers respond to hurricane events when their firms are located in the neighborhood of the disaster area. We find that the sudden shock to the perceived liquidity risk leads managers to increase corporate cash holdings and to express more concerns about hurricane risk in 10-Ks/10-Qs, even though the actual risk remains unchanged. Both effects are temporary. Over time, the perceived risk decreases, and the bias disappears. The distortion between perceived and actual risk is large, and the increase in cash is suboptimal. Overall, managerial reaction to hurricanes is consistent with salience theories of choice.
No file

Dates and versions

hal-02058251 , version 1 (05-03-2019)

Licence

Copyright

Identifiers

Cite

Olivier Dessaint, Adrien Matray. Do Managers Overreact to Salient Risks? Evidence from Hurricane Strikes. 2013. ⟨hal-02058251⟩

Collections

HEC CNRS
22 View
0 Download

Altmetric

Share

Gmail Facebook X LinkedIn More