The moderating role of institutional ownership on the role of CEO overconfidence on future firm risk

Subject Areas :

وحید اسکو ¹ , Reza Daghani ² , majid moradi ³

1 - گروه اداری و علم اقتصادی، دانشکده علوم انسانی و تربیت بدنی، دانشگاه گنبدکاووس، گنبدکاووس، ایران
2 - Department of Accounting, Shahab Danesh University , Iran
3 - Department of Accounting, Faculty of Management, Nasser Khosrow Institute, Saveh, Iran

Received: 2023-01-30 Published : 2025-07-08

Keywords: CEO overconfidence, future firm risk, institutional ownership.,

Abstract :

Uncertainty and the future risk, which considered one of the most challenging topics in the field of accounting research. Optimistic managers, when faced with difficulties and hardships, by using effective coping strategies, adapt themselves and their personal situations to these conditions in order to achieve their goals. Thus, these CEOs take more risks when making their decisions. Institutional shareholders, on the other hand, increase their oversight of managers 'behavior by improving corporate governance and reducing the risks of managers' decisions. Accordingly, this study seeks to investigate the effect of managers 'overconfidence on companies' future risk by emphasizing the moderating role of institutional ownership. For this purpose, a sample consisting of 116 listed companies in the Tehran Stock Exchange during 2013 to 2020 with using a multivariate regression model based on panel data technique, the results indicate that the overconfidence of managers measuring by investment and capital expenditures has a positive effect on the company's future risk. Moreover, institutional shareholders, as a moderating role, also undermine the positive relationship between management overconfidence and the company's future risk.