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Managerial Overconfidence, Corporate Social Responsibility Activities, and Financial Constraints

Title
Managerial Overconfidence, Corporate Social Responsibility Activities, and Financial Constraints
Authors
Park, Kyung-HeeByun, JinhoChoi, Paul Moon Sub
Ewha Authors
변진호최문섭
SCOPUS Author ID
변진호scopus; 최문섭scopus
Issue Date
2020
Journal Title
SUSTAINABILITY
ISSN
2071-1050JCR Link
Citation
SUSTAINABILITY vol. 12, no. 1
Keywords
CEO overconfidenceoptimismCSR activitieslong-run performancefinancial constraints
Publisher
MDPI
Indexed
SCIE; SSCI; SCOPUS WOS
Document Type
Article
Abstract
Managerial overconfidence refers to managers' cognitive bias, according to which they demonstrate unwarranted belief in their own judgments and capabilities. This study provides a new measurement of CEO overconfidence through textual analysis of management discussion and analysis (MD&A) in 10-K documents by making use of the US Securities and Exchange Commission (SEC) EDGAR database. Overconfidence was obtained from "optimism" using the Diction program. From a sample of 19,367 US firms from 1994 to 2016, we found that CEO overconfidence was negatively related to corporate social responsibility (CSR) activities. Since overconfident CEOs are likely to consider CSR activities less important than their own ability, they seem to reduce CSR activities. Also, CSR activities initiated by overconfident CEOs were negatively related to firms' long-term performance. However, CSR activities led to positive long-term performance in firms that were financially constrained. Our findings show that CSR activities undertaken as a result of CEO overconfidence by financially unconstrained firms could be harmful to shareholder value in the long term.
DOI
10.3390/su12010061
Appears in Collections:
경영대학 > 경영학전공 > Journal papers
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