Future expectations about stocks affect their price today. If a company is known to be in trouble, its shares will already be cheap. (A few people, most notably Warren Buffett, can reasonably disagree with this, because they're already very rich from beating the market. Everyone else should just assume that Warren Buffett has already traded the share down to its appropriate price.)

I suspect that the overconfidence explanation given in the article is closer to the right explanation. I was suspicious at first, but then the article gave figures about mergers. It's widely known that mergers usually don't meet expectations, so maybe overconfidence would lead a CEO to think they could escape this statistical fate.