Published Online:January 2026
Product Name:The IUP Journal of Corporate Governance
Product Type:Article
Product Code:IJCG030126
DOI:10.71329/IUPJCG/2026.25.1.48-67
Author Name:Diksha Saini and Balwinder Singh
Availability:YES
Subject/Domain:Management
Download Format:PDF
Pages:48-67
Based on the Upper Echelon Theory, the study examines the association between chief executive officer’s (CEO) confidence and firm profitability with the moderating role of corporate governance. This empirical work is based on a sample of S&P BSE 100 Indian firms for two financial years. CEO confidence is captured using two metrics, i.e., Conf_Capx and Conf_Growth, developed based on the investment decisions of CEOs. The findings of panel regression analysis demonstrate that CEO overconfidence adversely influences the company’s profitability as overconfident CEOs tend to hold unrealistic positive beliefs about their abilities and ignore the potential risk involved in their judgment. As a result, they often overinvest in their preferred sub-optimal projects and consequently decrease their profitability. The study contributes novel insights to the existing finance and organizational literature by assessing the impact of the most prevalent managerial behavioral bias on firm’s financial outcomes in the Indian context.
In the recent past, the concept of behavioral finance has gained exceptional attention from management scholars all over the world. It has collaborated with psychology and finance literature to answer the deviations in corporate performance that are beyond the reach of traditional finance.