| Summary: | Of many psychological biases, overconfidence has been described as one of the most powerful. Few studies have focused on collective overconfidence in team decision-making by boards of directors since boards are typically “black boxes”. Based on the shared cognition and trickle-down effect, we examine whether directors are blind to a chairperson's overconfidence. The results suggest that managerial overconfidence spreads among the board members through a “voting mechanism”. The contagion effect is more pronounced in state-owned enterprises that advocate an authoritarian style. However, increasing the number of board meetings to ensure adequate communication and discussion can mitigate this. Furthermore, we found evidence for the effects of contagious overconfidence on investment decisions. These results suggest that the group's overconfidence may be driven by individual cognitive bias, and this contagion effect can be reflected in business decisions. We should pay attention to the psychological bias in the context of collective decision-making.
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