2020 Volume 13 Issue Special_issue Pages S8-11
Using a set of survey data of corporate financial planning to CFOs of Japanese and U.S. firms conducted in March 2019 and March 2020, we examine how firms revise their investment plans during the pandemic shock caused by COVID-19. Our results show that firms with CFOs who anticipated narrower range of revenue growth ex ante widen the range of their projections in larger extent after facing the COVID-19 shock, while lowering their capital expenditure plans substantially. This range of projected revenue growth of a firm can be interpreted as reflecting the CFO’s overconfidence in terms of miscalibration. With the COVID-19 shock, which was impossible for firms to predict in advance, firms with overconfident CFOs are paying a larger price for it.
