Managerial Overconfidence Effects on Risk-Taking and Performance

Document Type : Research Paper


1 MSc of accounting in Abyek Basir Institute of Higher Education

2 Assistant Professor, Department of Accounting, Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran


Overconfidence occurs when people consider their abilities more than what they are. Overconfident managers overestimate their abilities in financial decision makings. Managerial overconfidence may affect a firm policies and decisions. This study is aimed to investigate the effects of managerial overconfidence on firm’s risk-taking and performance. This study uses multivariate regression model and panel data method to test the hypothesis. Independent variable is managerial overconfidence measured by 2 proxies based on investment. Dependent variables are risk-taking (Stock return SD and operating cash flow SD) and performance (ROA, ROE, and Qtobin ratio). The sample includes 150 firms listed in Tehran Stock Exchange during 2011-2015. The results show that managerial overconfidence has no effects on risk-taking and performance.


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