CEO overconfidence and forecast accuracy moderated by CEOs' accounting-based attributes

Ahmed, Faten Ben; Jarboui, Anis

doi:10.1108/jmd-08-2021-0236

Cited by 3 publications

(1 citation statement)

References 80 publications

(140 reference statements)

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“…Building on the upper echelons perspective, managerial overconfidence is a CEO's tendency to make estimates of their capabilities and knowledge (Hambrick, 2007) regarding strategic decisions. Previous studies show that CEO overconfidence, a common personality trait, is associated with more desirable and unrealistic outcomes' expectations (Taylor and Brown, 1988), riskier debt and investment strategies (Malmendier and Tate, 2008) and over-optimistic forecasting (Ben Ahmed and Jarboui, 2022). Being overconfident has been related to the desire for higher-level investments depending on intensified investment cash flow sensitivity (Malmendier and Tate, 2005).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

CEO overconfidence and tax avoidance: role of institutional and family ownership

Souguir,

Lassoued,

Bouzgarrou

2023

IJMF

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PurposeThis study aims to investigate the effect of overconfident chief executive officers (CEOs) on corporate tax avoidance and whether this relationship is affected by institutional and family ownership.Design/methodology/approachUsing a sample of French-listed firms from 2009 to 2021, the authors find that firms managed by overconfident CEOs engage in more tax avoidance practice.FindingsThe authors further find that institutions and families are likely to discourage tax avoidance practices, paying close attention to their long-term horizons and reputational concerns. Overall, the authors' findings shed light on the monitoring role of institutional and family shareholders in restraining the effect of CEO behavioral bias on companies' tax avoidance.Originality/valueTo the authors' knowledge, no study has investigated the impact of managerial overconfidence on the tax behavior of French firms. The authors also extend the growing literature regarding managerial effects by providing new evidence that French firms held by concentrated institutional and family ownership curtail CEO overconfidence behavior toward corporate tax avoidance practices.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

CEO overconfidence and tax avoidance: role of institutional and family ownership

Souguir,

Lassoued,

Bouzgarrou

2023

IJMF

View full text Add to dashboard Cite

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Managerial overconfidence, earnings management and the moderating role of business ethics: evidence from the Stoxx Europe 600

Marzouki,

Ben Amar

2024

IJOES

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Purpose This paper aims to explore the relationship between CEO overconfidence and earnings management examined by the discretionary accruals and if this relationship is moderated by business ethics. Design/methodology/approach Data from a sample of 246 European firms selected from the Stoxx Europe 600 Index between 2010 and 2022 were used to test the model using panel data and multiple regressions. This paper considered the feasible generalized least squares (FGLS) estimation for linear panel data models. A multiple regression model is used to analyze the moderating effect of business ethics on the association between CEO overconfidence and earnings management. For robustness analyses, this paper included the alternative measure of the dependent variable and independent variable. Findings Using discretionary accruals as a proxy for earnings management, the empirical results show a positive relationship between CEO overconfidence and earnings management. Furthermore, the results suggest that business ethics negatively moderates the relationship between CEO overconfidence and earnings management. Practical implications This paper makes a significant contribution to stakeholders such as investors, financial decision-makers and auditors. It underscores the importance of integrating ethical considerations into corporate governance practices for fostering accountability and transparency. In addition, it highlights the moderating role of business ethics in transforming the positive effect of CEO overconfidence on earnings management into a negative impact. This emphasizes the pivotal role of ethical norms in financial decision-making processes and extends implications to standard setters and policymakers in the regulatory domain. Originality/value To the best of the authors’ knowledge, this is the first study to examine the moderating role of business ethics on the relationship between CEO overconfidence and earnings management in the European context. It is also the first study to document that business ethics can reduce the effect of CEOs’ biased behavior and their scope for discretion, thereby reducing the amount of earnings management. This study fills a research gap by extending the existing literature, which generally focuses on the impact of CEO overconfidence and earnings management.

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Does ownership structure drive the effect of CEO overconfidence on earnings quality?

Bzeouich,

Depoers,

Lakhal

2024

JAAR

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PurposeThe purpose of this paper is to examine the effect of chief executive officer (CEO) overconfidence on earnings quality and the moderating role of ownership structure as a crucial corporate governance device.Design/methodology/approachThe paper uses the generalized method of moments (GMM) estimation method to test our models on a sample of 335 French companies between 2009 and 2020, i.e. 4,020 observations.FindingsThe results show that CEO overconfidence negatively affects earnings quality. This result supports the predictions of behavioral finance theory and suggests that CEO overconfidence is a behavioral bias that affects the quality of earnings. The authors also examined the effect of different types of ownership structures on this relationship. The results show the significant role of controlling shareholders, owner-managers, families and institutional investors in mitigating the negative effect of CEO overconfidence on earnings quality.Research limitations/implicationsThis paper has some limitations. First, other types of ownership structures could have been analyzed such as state ownership. Second, we ignored the role of the board of directors as an important governance mechanism in controlling overconfident CEOs’ actions.Practical implicationsCompanies should be aware of the potential risks associated with CEO overconfidence, which can compromise the faithful representation of earnings. This highlights the importance of effective monitoring and internal controls to detect and prevent such practices, which involve the role of ownership structure.Originality/valueThis paper addresses the effect of CEO overconfidence on earnings quality and provides new evidence on the role of different ownership structure types in shaping this relationship. Additionally, this paper sheds new light on how overconfident CEOs may behave in challenging times.

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CEO overconfidence and forecast accuracy moderated by CEOs' accounting-based attributes

Cited by 3 publications

References 80 publications

CEO overconfidence and tax avoidance: role of institutional and family ownership

CEO overconfidence and tax avoidance: role of institutional and family ownership

Managerial overconfidence, earnings management and the moderating role of business ethics: evidence from the Stoxx Europe 600

Does ownership structure drive the effect of CEO overconfidence on earnings quality?

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