Investigating the Relationship between CEO Optimism, CEO Selection, compensation, and Corporate Investment Decisions
Subject Areas : General Management
Parvin Sadri
1
,
shima parysay
2
1 - Accounting Department, faculty of management and accounting, Islamic Azad University of Saveh, Iran
2 - Accounting Department, faculty of management and accounting, Islamic Azad University of Saveh, Iran
Keywords: CEO optimism, CEO selection, compensation, corporate investment decisions,
Abstract :
This study aims at investigating the relationship between CEO optimism, CEO selection, compensation, and corporate investment decisions. The study focused on companies listed on the Tehran Stock Exchange between 2015 and 2021. The present research falls into the category of applied research. If we classify research types based on nature and methodology, the current research method falls into the descriptive research category and, in terms of methodology, is considered a correlational study. For data collection, a library research method was employed. Data were collected from financial statements, explanatory notes, and the stock exchange monthly magazine for the sample companies. Using a systematic elimination method, 126 companies were selected as the statistical sample. Descriptive and inferential statistics were used for data description and summarization. To analyze the data, preliminary tests such as variance heterogeneity tests, Levene’s, Hausman, and Jarque–Bera tests were conducted. Subsequently, a multivariate regression test was used to confirm or reject the research hypotheses (using E-Views software). The obtained results indicated that CEO optimism significantly influences CEO selection, bounces, and corporate investment decisions.
References
• Badiee and Davoodi Kasbi (2017): “Investigating the Relationship between Managerial Overconfidence and Financial Performance Evaluation and Risk.” Presented at the First Conference on Accounting, Management, and Economics with a National Economic Dynamism Approach, Malayer, Islamic Azad University, Malayer Branch (Written in Persian).
• Bouteska A, Boutheina R. (2018). “Loss aversion, overconfidence of investors and their impact on market performance evidence from the US stock markets”, Journal of Economics, Finance and Administrative Science, 25(50): 451-478
• Chen, H. & Chen, C. (2015). “Managerial Overconfidence and Bank Risk Taking: A Cross-Country Analysis”. European Financial Management Association, 2015 Annual Meetings, 24-27.
• Chen, P. J., & Hsu, C. Y. (2022). “CEO optimism, CEO selection, compensation, and corporate investment decision: The case of CEOs who were rehired as CEOs by other firms after turnover”. The North American Journal of Economics and Finance, 63: 101797.
• Choi, P. M. S., Chung, C. Y., Liu, C. (2018). “Self-attribution of overconfident CEOs and asymmetric investment-cash flow sensitivity”, The North American Journal of Economics and Finance 46: 1-14.
• Chakraborty, N Gupta, J Mahakud .(2023). “Corporate governance and investment decisions of retail investors in equity: do group affiliation and firm age matter?”. Managerial Auditing . emerald.com.
• Davoudi and Ghoforian Shaghardi (2019): “The Relationship Between CEO Confidence Overconfidence and Company Performance in Companies Listed on the Tehran Stock Exchange.” Presented at the Seventeenth National Conference on Iranian Accounting, Qom (Written in Persian).
• Gholami Jamkarni, Mohammadi, and Seyyed Mosi (2018): “The Impact of Ownership Type on the Relationship Between Executive Managers’ Characteristics and Investment Efficiency.” Published in the journal Research in Financial Accounting and Auditing, Volume 40, Issue 10, pages 89-109
• Hamedi and Saraf (2017): “The Relationship Between Excessive Managerial Confidence and Financial and Economic Performance in Companies Listed on the Tehran Stock Exchange.” Presented at the Third International Conference on Management, Accounting, and Economics with an Emphasis on Economic Resilience, Tehran, Allameh Majlesi University (Written in Persian).
• Hasani, Talebi, and Zirdast (2018): “The Impact of Inflation Rate Fluctuations on the Relationship Between Managerial Overconfidence and Overinvestment.” Published in the Journal of Accounting and Management Perspectives, Volume 1, Issue 1 (Written in Persian).
• Hirshleifer, D., Low, A., Teoh, S. H (2012). “Are overconfidence CEOs better innovators?”, Journal of Finance 67: 1457-1498.
• Itzhak Ben-David, John R. Graham, Campbell R. Harvey, Managerial Miscalibration*, The Quarterly Journal of Economics, Volume 128, Issue 4, November 2013, Pages 1547–1584
• Kennedy, J., Anderson, C., Moore, D. (2013). “When overconfidence is revealed to others: testing the status-enhancement theory of overconfidence”. Organizational Behavior and Human Decision Processes 122: 266-279.
• Kim, D., & Na, H. (2016). “The forecast dispersion anomaly revisited: Time-series forecast dispersion and the cross-section of stock returns”. Journal of Empirical Finance, 39: 37-53
• Khati Dizabadi and Gholinezhad Jamali (2020): “Examining the Relationship Between Excessive Confidence and Managerial Optimism with the Capital Structure of Companies Listed on the Tehran Stock Exchange.” Presented at the Seventh International Conference on Financial Affairs, Trade, Banking, Economics, and Accounting (Written in Persian).
• Kkoo Ho & Yang, Daecheon. (2018). “Managerial Overconfidence, Self-Attribution Bias, and Downwardly Sticky Investment: Evidence from Korea”. Emerging Markets Finance and Trade, 54(1), 144-161.
• Lai, S., Li, X., Chan, K. C .(2021). “CEO overconfidence and labor investment efficiency”, The North American Journal of Economics and Finance 55: 101319.
• Lu Xiaowei, Ya Sheng & Jiexiang Wang .(2020). “The influence of executivecompensation incentives on R&D investment: the moderating effect of executive overconfidence”,Technology Analysis & Strategic Management, DOI: 10.1080.09537325.2020.1748184.
• Mohammadi Y., Mohammadi E., and Esmaili Kia G.(2019): “Overconfidence of Managers, Financial Provision Policies, and Investment Efficiency.” Published in the Biannual Journal of Iranian Economic Issues, Issue 2, pages 1-171 (Written in Persian).
• Moradi M. and Jafarnejad Z. (2016): “Investigating the Relationship Between False Managerial Confidence and Performance of Companies Listed on the Tehran Stock Exchange.” Master’s thesis, Islamic Azad University - Shahroud Branch - Faculty of Economics and Accounting (Written in Persian).
• Qaemmaghami S. M. (2017): “Examining the Impact of Managerial Optimism on High Valuation of Stocks in Selected Companies on the Tehran Stock Exchange.” Presented at the First National Conference on Innovative Research in Iran and World Management, Economics, Accounting, and Humanities in Shiraz (Written in Persian)
• Salehi, M., Afzal Aghaei Naeini, A., & Rouhi, S. (2020). “The relationship between managers’ narcissism and overconfidence on corporate risk-taking”. The TQM Journal, ahead-of-print(ahead-of-print). doi:10.1108.tqm-07-2020-0168.
• Shafieinejad I. (2022): “Investigating the Relationship between Excessive Managerial Self-Confidence, Domestic Financial Provision, and Investment Performance in the Tehran Stock Exchange.” Presented at the Ninth International Conference on Innovative Research in Accounting, Management, and Humanities in the Third Millennium (Written in Persian).
• Studeh R., Zeinli Kermani A., Bakhshesh Tanyani H. (1400): “Excessive Managerial Self-Confidence and Its Impact on Internal Financial Provision and Investment Efficiency in Companies Listed on the Tehran Stock Exchange.” Published in the Public Policy Quarterly in Management, Volume 44, Issue 2, pages 109-99
• Takada, T., & Muramiya, K. (2017). “Quality of Financial Inputs and Management Earnings Forecast Accuracy in Japan”. Available at SSRN 2940578.
• Vaez, Seyyed Ali; Montazerhajat, Amirhossein; and Banaei Ghadim, Rahim (2018): “Investigating the Impact of Earnings Accuracy Dimensions on Board of Directors’ Compensation in Companies Listed on the Tehran Stock Exchange.” Published in the journal Public Policy Quarterly in Management, Volume 44, Issue 2, pages 109-99
• Vitanova, Ivana .(2019). “Nurturing overconfidence: The relationship between leader power, overconfidence and firm performance”. The Leadership Quarterly, (2): 1-16.
• Zamani Khorasgani and Heydari (2022): “The Effect of Managerial Overconfidence on Corporate Social Responsibility Activities.” Presented at the Eighteenth National Conference on Innovative Approaches in Management, Economics, and Accounting, Babol (Written in Persian).
• Zinali and Aghabigi (2019): “Investigating the Relationship Between CEO False Confidence and Company Performance and Profit Management in Companies Listed on the Tehran Stock Exchange.” Published in the Journal of Accounting and Management Perspectives, Volume 10, Issue 1(Written in Persian).
• Zinalli Kermani S., and Teyyani B. (2021): “Excessive Managerial Confidence and Internal Financing Efficiency in Companies Listed on the Tehran Stock Exchange.” Presented at the Ninth International Conference on Innovative Research in Accounting, Management, and Economics.(Written in Persian)
