IRCI Article ID: IRCI-AR-0000001370

The Effect of Managerial Overconfidence on Firm Performance in Emerging Market Asia

Authors:

Frida Yuniar Prastika Ari Warokka Gatot Nazir Ahmad

Journal: International Journal of Social Science, Education, Communication and Economics (SINOMICS Journal)

Publication: · Vol. 3 No. 5 · pp. 1437–1450

DOI: 10.54443/sj.v3i5.431

Cite this article

Citation

Choose a citation style or copy BibTeX for your reference manager.

Style

View Original Publication

Abstract

Abstract CEO Overconfidence plays an important role in determining company performance, especially in the Emerging Market Asia period 2010-2019 in the manufacturing, energy, health, and technology sectors. This study uses secondary data taken from Refinitiv Eikon Financial Analysis. This study aims to determine the effect of managerial overconfidence on company performance as proxied by Return on Asset (ROA), Tobin's Q, and Debt to Equity Ratio (DER). This study uses the Principal Component Analysis (PCA) technique and panel data regression. The results of the study indicate that managerial overconfidence has a significant effect on ROA. However, managerial overconfidence does not have a significant effect on Tobin's Q and DER. This explains that managerial overconfidence can directly affect company performance.

0
IRCI Cited By

30
Indexed References

Authors

Frida Yuniar Prastika

Affiliation: Department of Magister Management, Universitas Negeri Jakarta, Indonesia

Ari Warokka

Affiliation: Department of Magister Management, Universitas Negeri Jakarta, Indonesia

Gatot Nazir Ahmad

Affiliation: Department of Magister Management, Universitas Negeri Jakarta, Indonesia

References

Abdul, S., Bala, R., & Auwal Babangida, M. (2022). Capital Structure and Financial Performance of Quoted Deposit Money Banks (DMBs) in Nigeria. Asian Journal of Economics, Business and Accounting, 1–10. https://doi.org/10.9734/AJEBA/2022/V22I530557

Abuamsha, M., & Shumali, S. (2022). Debt structure and its impact on financial performance: An empirical study on the Palestinian stock exchange. Journal of International Studies, 15(1), 211–229. https://doi.org/10.14254/2071-8330.2022/15-1/14

Altarawneh, M., Shafie, R., & Ishak, R. (2020). CEO Characteristics: A Literature Review and Future Directions. In Article in Academy of Strategic Management Journal. https://www.researchgate.net/publication/340077212

Azizah, F., & Amin, M. Al. (2020). Pengaruh Koneksi Politik Terhadap Kinerja Perusahaan (Studi Empiris pada Perusahaan Sektor Pertambangan yang terdaftar di BEI tahun 2014-2018). Indonesian Journal of Accounting and Governance, 4(1), 1–17. https://doi.org/10.36766/ijag.v4i1.38

Bartodziej, C. J. (2017). The Concept Industry 4.0. Springer. https://doi.org/10.1007/978-3-658-16502-4

Behun, M., Gavurova, B., Tkacova, A., & Kotaskova, A. (2018). The impact of the manufacturing industry on the economic cycle of european union countries. Journal of Competitiveness, 10(1), 23–39. https://doi.org/10.7441/JOC.2018.01.02

Buliga, O., Scheiner, C. W., & Voigt, K. I. (2016). Business model innovation and organizational resilience: towards an integrated conceptual framework. Journal of Business Economics 2015 86:6, 86(6), 647–670. https://doi.org/10.1007/S11573-015-0796-Y

Burgelman, A. R., Floyd, W. S., Laamanen, T., Mantere, S., Vaara, E., & Whittington, R. (2018). Strategy Processes and Practices: Dialogues and Intersections. Strategic Management Journal.

Burkhard, B., Sirén, C., Essen, V. M., Grichnik, D., & Shepherd, A. D. (2022). Nothing Ventured, Nothing Gained: A Meta-Analysis of CEO Overconfidence, Strategic Risk Taking, and Performance. Journal of Management, 49(8), 2629–2666. https://doi.org/10.1177/01492063221110203

Chen, S. S., Ho, K. Y., & Ho, P. H. (2014). CEO Overconfidence and Long-Term Performance Following R&D Increases. Financial Management, 43(2), 245–269. https://doi.org/10.1111/FIMA.12035

Chen, W. (Tina), Zhou, G. (Stephen), & Zhu, X. (Kevin). (2019). CEO tenure and corporate social responsibility performance. Journal of Business Research, 95, 292–302. https://doi.org/10.1016/J.JBUSRES.2018.08.018

Coykendall, J., Hardin, K., Brady, A., & Hussain, A. (2023). Riding The Exponential Growth in Space. . Https://Www2.Deloitte.Com/Uk/EnRetrieved from: /Insights/Industry/Aerospace-Defense/Future-of-Space-Economy.

Fast, N. J., Sivanathan, N., Mayer, N. D., & Galinsky, A. D. (2012). Power and overconfident decision-making. Organizational Behavior and Human Decision Processes, 117(2), 249–260. https://doi.org/10.1016/J.OBHDP.2011.11.009

Gutierrez, C., Åstebro, T., & Obloj, T. (2020). The impact of overconfidence and ambiguity attitude on market entry. Organization Science, 31(2), 308–329. https://doi.org/10.1287/ORSC.2019.1300

Hambrick, D. C., & Finkelstein, S. (1987). Managerial discretion: A bridge between polar views of organizational outcomes. Research in Organizational Behavior, 9, 369–406.

Heavey, C., Simsek, Z., Fox, B. C., & Hersel, M. C. (2022). Executive Confidence: A Multidisciplinary Review, Synthesis, and Agenda for Future Research. Journal of Management, 48(6), 1430–1468. https://doi.org/10.1177/01492063211062566

Ho, G. J., Liew, S. M., Ng, C. J., Shunmugam, R. H., & Glasziou, P. (2016). Development of a Search Strategy for an Evidence Based Retrieval Service. PLoS ONE, 11(12). https://doi.org/10.1371/JOURNAL.PONE.0167170

Huang, Y., Wang, X., Li, Y., & Yu, X. (2022). CEO Overconfidence, Corporate Governance, and R&D Smoothing in Technology-Based Entrepreneurial Firms. Frontiers in Psychology, 13, 944117. https://doi.org/10.3389/FPSYG.2022.944117/BIBTEX

Johnson, D. D. P., & Fowler, J. H. (2011). The evolution of overconfidence. Nature, 477(7364), 317–320. https://doi.org/10.1038/NATURE10384

Kolev, K. D., & McNamara, G. (2020). The role of top management teams in firm responses to performance shortfalls. Https://Doi.Org/10.1177/1476127020962683, 20(3), 541–564. https://doi.org/10.1177/1476127020962683

Korteling, J. E., & Toet, A. (2022). Cognitive Biases. Encyclopedia of Behavioral Neuroscience: Volumes 1-3, Second Edition, 1–3, 610–619. https://doi.org/10.1016/B978-0-12-809324-5.24105-9

Kunz, J., & Sonnenholzner, L. (2023). Managerial overconfidence: promoter of or obstacle to organizational resilience? In Review of Managerial Science (Vol. 17, Issue 1, pp. 67–128). Springer Science and Business Media Deutschland GmbH. https://doi.org/10.1007/s11846-022-00530-y

Malmendier, U., & Tate, G. (2015). Behavioral CEOs: The Role of Managerial Overconfidence. Journal of Economic Perspectives, 29(4), 37–60. https://doi.org/10.1257/JEP.29.4.37

McKinsey & Company. (2023). State of Organizations 2023 McKinsey & Company.

Moore, D. A., & Healy, P. J. (2008). The Trouble With Overconfidence. Psychological Review, 115(2), 502–517. https://doi.org/10.1037/0033-295X.115.2.502

Pranata, J., Purwanto, M., & Lindrawati, L. (2019). Pengaruh Family Ownership dan Direktur Independen Terhadap Kinerja Perusahaan. Seminar Nasional Ilmu Terapan, 3(1), E12–E12. https://ojs.widyakartika.ac.id/index.php/sniter/article/view/109

Quigley, J. T., & Graffin, D. S. (2017). Reaffirming the CEO effect is significant and much larger than chance: A comment on Fitza (2014). Strategic Management Journal, 38(3), 793–801.

Reischauer, G. (2018). Industry 4.0 as policy-driven discourse to institutionalize innovation systems in manufacturing. Technological Forecasting and Social Change, 132, 26–33. https://doi.org/10.1016/J.TECHFORE.2018.02.012

Sofiatin, D. A. (2020). Pengaruh Profitabilitas, Leverage, Likuiditas, Ukuran Perusahaan, Kebijakan Deviden Terhadap Nilai Perusahaan (Studi Empiris pada Perusahaan Manufaktur subsektor Industri dan Kimia yang terdaftar di BEI periode 2014-2018). Prisma (Platform Riset Mahasiswa Akuntansi), 1(1), 47–57. https://ojs.stiesa.ac.id/index.php/prisma/article/view/366

Taouab, O., & Issor, Z. (2019). Firm Performance: Definition and Measurement Models. European Scientific Journal ESJ, 15(1). https://doi.org/10.19044/esj.2019.v15n1p93

Cited By (0)

No indexed citing article has been matched by IRCI yet.