Would Overconfident CEOs Engage More in Environment, Social, and Governance Investments? With a Focus on Female Representation on Boards

Jaehong Lee and Eunsoo Kim
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Jaehong Lee: Major in Accounting Taxation, College of Software and Management, Kyonggi University, Suwon 16227, Korea
Eunsoo Kim: College of Business, Sangmyung University, Seoul 03016, Korea

Sustainability, 2021, vol. 13, issue 6, 1-16

Abstract: This study examines the relationship between CEO overconfidence, environment, social, and governance investments, and firm value. Drawing on insights from upper echelon and agency theory, greater female representation on boards is expected to act as an independent monitoring mechanism to control and reconcile CEO overconfidence which leads to enhancement of corporate value induced by environment, social, and governance investments. Empirical evidence in this study finds that, on average, overconfident managers tend to engage in ESG investments in South Korea. Furthermore, in firms with high environment, social, and governance investments, the negative association between CEO overconfidence and firm value is mitigated, showing that environment, social, and governance investments are effective moderators in controlling and constraining managerial overconfidence. Finally, we find that the joint impact of CEO overconfidence and environment, social, and governance investments on corporate value is distinctive in firms with female board representation. Taken together, we find that negative effects associated with CEO overconfidence can be alleviated by the role of female leadership that links corporate environment, social, and governance investments to firm value.

Keywords: CEO overconfidence; environment, social and governance investments; female executives; firm value (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 (4)

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