Ceo’s Overconfidence and Firm Performance of Listed Companies in Vietnam

Abstract

Introduction: In this study, the author uses data from listed companies on the Ho Chi Minh City and Hanoi Stock Exchanges from 2012 to 2022 to examine the impact of CEOs' overconfidence on firm performance measured through ROA

Objectives: The author uses four measures of CEO overconfidence behavior including: excess cash flow, excess earnings, revenue management, and cost management. From there, the author aims to evaluate the impact of overconfidence behavior on firm performance.

Methods: To conduct a cross-sectional regression study to measure CEO overconfidence behavior, and then use panel data regression to assess the impact of overconfidence on performance

Results: The results show that CEO’s overconfidence behavior caused by excess cash flow or excess earnings will increase performance, while CEO’s overconfidence behavior caused by revenue and cost control will decrease performance. Overconfidence combined with ownership form will have an impact on efficiency, but the interaction effect with stock market growth is unclear.

Conclusions: From the results, the author also proposes recommendations on how to control the overconfidence behavior of CEOs to avoid risks arising, helping to stabilize and increase business performance.