The Effect of CEO Overconfidence on Accounting Conservatism

• Main Authors: Hsiao-ching Tseng, 曾筱晴
• Other Authors: 高蘭芬
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/6se239

碩士 === 國立高雄大學 === 金融管理學系碩士班 === 102 === Previous research in finance documents that overconfidence affects corporate investment, financing, and dividend policies. Recent research in accounting examines the effect of executive overconfidence on information disclosures and financial reporting. We extend this line of research by investigating the effects of managerial overconfidence on accounting conservatism. In addition, this study examines the relationship between Group firms and accounting conservatism and whether the relationship is affected by managerial overconfidence. Our tests are based on a sample of listed companies in Taiwan from 2003 to 2012 and use three measures of overconfidence: (1) net purchases of the firm’s shares by the CEO, (2) capital expenditures above the industry median, and (3) excess asset growth. We find that conservatism is negatively related to purchase based measure of overconfidence and positively related to investment measure of conservatism. The latter result can be explained by the higher demand for conservatism from stakeholders. We also show that Group firms are less conservative relative to non-group firms. However, for firms with CEO overconfidence, there is no difference between group and non-group firms.