CFO overconfidence, environmental violations, and firm performance. The moderating role of constituency statutes

Abstract

This study examines the relationship between Chief Financial Officer (CFO) overconfidence and firm performance through the lens of environmental violations and constituency statutes. Drawing on stakeholder and upper echelons theories, we find that firms with overconfident CFOs are more likely to commit environmental violations, which negatively impact their long-term performance. Our empirical evidence suggests that this effect can be moderated by the introduction of constituency statutes and violation penalties. Notably, firms with overconfident CFOs may benefit more from stakeholder-oriented laws while also incurring higher penalties for environmental violations.