Accounting Papers

Document Type

Journal Article

Date of this Version

8-2010

Publication Source

Strategic Management Journal

Volume

31

Issue

8

Start Page

822

Last Page

840

DOI

10.1002/smj.833

Abstract

This research examines the rationality of the expectations of nascent entrepreneurs. Consistent with conjectures regarding entry into self-employment, I find substantial overoptimism in nascent entrepreneurs' expectations, in that they overestimate the probability that their nascent activity will result in an operating venture. Further, for those ventures that achieve operation, individuals overestimate the expected future sales and employment. To explain variations in overoptimism, I posit that those individuals who adopt an inside view to forecasting through the use of plans and financial projections, will exhibit greater ex ante bias in their expectations. Consistent with the inside view causing overoptimism in expectations, I find that the preparation of projected financial statements results in more overly optimistic venture sale forecasts. Copyright © 2010 John Wiley & Sons, Ltd.

Copyright/Permission Statement

This is the peer reviewed version of the following article: Cassar, G. (2010), Are individuals entering self-employment overly optimistic? an empirical test of plans and projections on nascent entrepreneur expectations. Strat. Mgmt. J., 31: 822–840. , which has been published in final form at doi: 10.1002/smj.833. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms.

Keywords

expectations, final projections, forecasting, nascent entrepreneur, overoptimism, planning, rationality

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Date Posted: 27 November 2017

This document has been peer reviewed.