The Association among CEO Overconfidence, Ownership Structure and Financial Performance

Abstract

This paper explores the relationship among ownership type, managerial overconfidence, and corporate performance. In addition, the purposes of this research are to examine the structure of ownership and CEO overconfidence of family businesses and investigates whether it influences the performance. This study uses a panel estimation to exploit both the cross-section and time–series nature of the data; our sample includes firms listed on Taiwan’s stock market during the period of 2009 to 2018, totally 6,612. These results show that (1) financial performance of family business is worse than that of non-family business. It means that family interests of family business are higher than those of company which lead to exploited; (2) CEO overconfidence of family business is lower than that of non-family business. Family supervision and control can lead to family business managers who depress his (her) own overconfident tendency; (3) the overconfident CEO has poor impact on corporate performance. This means that manager’s overconfident expectations will damage company’s benefits; and (4) after the overconfident CEO joins family business, corporate performance will be increased. It means overconfident manager can compensate for family’s conservativeness and lead to increased corporate performance.