CEO Overconfidence and Corporate Governance in Affecting Australian Listed Construction and Property Firms’ Trading Activity

Mahmoud Hijjawi, Chyi Lin Lee and Jufri Marzuki
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Mahmoud Hijjawi: School of Business, Western Sydney University, Parramatta, NSW 2150, Australia
Chyi Lin Lee: School of Built Environment, University of New South Wales, Sydney, NSW 2052, Australia
Jufri Marzuki: School of Business, Western Sydney University, Parramatta, NSW 2150, Australia

Sustainability, 2021, vol. 13, issue 19, 1-15

Abstract: This paper aims to examine whether and to what extent overconfident CEOs affect Australian real estate investment trusts’ (A-REITs) property investment activities during their tenure as the CEO of A-REITs, covering the period 2000–2019. A-REITs’ property investment and disposal activities are separately modelled against CEOs shares in their companies (an indicator of CEO overconfidence), as well as other controlled variables. We found that around 68% of A-REIT CEOs are overconfident over the study period. However, our empirical results also indicated that CEO overconfidence did not have a profound impact on A-REITs’ investment activities, either property acquisitions or disposals. This could be explained by high corporate governance of A-REITs. Specifically, Australian construction and property companies are the leading market players in sustainability. As publicly quoted companies, listed property and construction companies, particularly A-REITs could be exposed to various managerial issues, including corporate CEO overconfidence and its influence on the investment decision-making process. However, this managerial issue could be minimized via an enhancement of corporate governance that is a key pillar of sustainability. The mitigation of corporate overconfidence and implementation of corporate governance mechanisms makes REITs more accountable to their investors. The implications of the findings have also been discussed.

Keywords: A-REITs; investments; overconfidence; corporate governance; construction and property firms; behavior (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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