A Theoretical Study of Managers' Behavioral Trait of Overconfidence in Managerial Decision Makings

Subject Areas : Ethics and accounting

Nafiseh Ghomi ¹ (PhD. Student, Department of Accounting, Qom Branch, Islamic Azad University, Qom, Iran)
Mojgan Safa ² (Assistant Professor, Department of Accounting, Qom Branch, Islamic Azad University, Qom, Iran)
Zohreh Hajiha ³ (Professor, Department of Accounting, Tehran East Branch, Islamic Azad University, Tehran, Iran)
Reza Gholami Jamkarani ⁴ (Associate Professor, Department of Accounting, Qom Branch, Islamic Azad University, Qom, Iran.)

Received: 2023-08-05 Accepted : 2023-08-26 Published : 2023-09-23

Keywords: Managers, Overconfidence, Financial Reporting, Managerial Decision Making,

Abstract :

Purpose: The purpose of the present study is the theoretical review of managers' behavioral trait of overconfidence in managerial decision making.Method: The method of the current research is historical exploration within the framework of library study as a theoretical-analytical research.Results: Managers who have a high level of self-confidence are mostly optimistic about their decisions and their impact on investment decisions. Financial reporting risk in companies with optimistic managers is higher.Conclusion: In general, there is a favorable level of managerial overconfidence that brings about more benefits for the managers in their occupation. However, when it goes over its favorable level, it would lead to inefficient investment and may even damage the value of the company. It is suggested to legislators and stockholders in companies to pay more attention to managers' traits and their commitment to accounting standards and principles in order to decrease the risk of financial reporting deviation in corporations. In this regard, improvement of the organizational structure of companies can be effective. 

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