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Impact of CEO Overconfidence on Corporate Financing Decision with Mediating Role of Risk Perception

Author

Listed:
  • Amina Batool

    (International Islamic University, Islamabad)

  • Tahira Awan

    (International Islamic University, Islamabad)

  • Sumayya Chugtai

    (International Islamic University, Islamabad)

Abstract

The purpose of this paper is to investigate the impact of managerial (Chief Executive Officer) overconfidence on corporate financing decision with the mediating role of risk perception. This study indicates that psychological factors and biases affect the decision making of human beings including top management. The research design of this research work is causal and primary data has been used to test the results of this study. Among all the companies listed on Pakistan Stock Exchange, researchers have selected top executives of 200 companies as a sample. E-Questionnaire has been used to collect the required data through LinkedIn and other mailing sources. Simple linear regression and correlation have been employed to test the model and Baron and Kenny (1986) four-step mediation has been used to test the mediation effect of risk perception. Results of this study conclude that there is a significant positive relationship between overconfidence of CEO and leverage suggested that there is a significant negative relationship between CEO overconfidence and risk perception. However, there is an insignificant result for the mediating role of risk perception between CEO overconfidence and leverage. The results are in line with previous studies on emerging economies.

Suggested Citation

  • Amina Batool & Tahira Awan & Sumayya Chugtai, 2021. "Impact of CEO Overconfidence on Corporate Financing Decision with Mediating Role of Risk Perception," Business Review, School of Economics and Social Sciences, IBA Karachi, vol. 16(2), pages 77-95, July-Dece.
    • Handle: RePEc:aho:journl:v:16:y:2021:i:2:p:77-95
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    File URL: https://ir.iba.edu.pk/businessreview/vol16/iss2/5/
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