CEO Overconfidence: Systematic Literature Review
Ita Ukhtianti Qanitah

Universitas Airlangga

Abstract

Purpose - This paper aims to systematically review and synthesize existing research about overconfidence behavior of firm CEO and examines the findings to elucidate the measurement, antecedents, impact, and consequences associated with CEO overconfidence.
Design/methodology/approach - This paper cover the research about CEO overconfidence from 2014-2023, using Boolean research searches on the Scopus databases to extract 77 papers.
Findings - It was found that the measurement of CEO overconfidence is still dominated by option and press-based measures based on Malmendier and Tate (2005). CEO overconfdence affects various aspects, both financial and non-financial. From 77 articles, the most studied are related to its influence on capital structure, especially leverage. The effect of CEO overconfidence on risk is also widely studied, such as risk taking, default risk, corporate failure, CEO turnover, bank insolvency, and systematic risk. In addition, the influence of CEO overconfidence in finance also includes investment, mergers and acquisitions, tax. The influence in nonfinance policies includes human capital. Consequence of CEO overconfidence is firm performance and value. CEO overconfidence in firms is negatively related to performance and thus significantly reduces the levels of a firm^s total profitability. Conversely, the presence of CEO overconfidence in the firm can increase firm value.
Research limitation/implications - The limitation of this research is that it only uses the Scopus database. Future research can add databases, such as Web of Science so that it is likely to get different results.
Originality/value - While there has been extensive about CEO overconfidence, no coherent framework. This study fills this gap by building a framework that identifies measurement, antecedents, impact, and consequences associated with CEO overconfidence.
Keywords - CEO Overconfidence, capital structure, risk, investment, firm performance, firm value.
Paper type - Systematic Literature Review

Keywords: CEO Overconfidence, capital structure, risk, investment, firm performance, firm value.

Topic: Financial management