The sandwich game: Founder-CEOs and forecasting as impression management

We examine the use of positively biased forecasts by (non-)founder-CEOs as an impression management tactic vis-à-vis their existing investors. We hypothesize that founder-CEOs will strategically provide less positively biased forecasts to their investors than non-founder-CEOs. Using two independent samples with revenue forecasts reported to different venture capital investors and a causal chain scenario study consisting of two experiments, we find consistent support for our hypothesis. Our paper adds nuance to the dominant perspective on forecasting errors by theorizing and showing that inflated forecasts are not solely the result of cognitive bias but can be a deliberate, discretionary form of IM that takes into account the CEO’s trade-off between the social/financial costs versus benefits of providing more positive forecasts to investors.

Collewaert, V., Vanacker, T., Anseel, F., & Bourgois, D. (2021). The sandwich game: Founder-CEOs and forecasting as impression management. Journal of Business Venturing.