When Confidence Backfires: The Impact of Managerial Overconfidence on Environmental Information Disclosure

Ying Lu, Tingting Liu, Junrui Zhang () and Hussain Muhammad Jameel
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Ying Lu: School of Management, Xi’an Jiaotong University, Xi’an 710049, China
Tingting Liu: School of Management, Xi’an Jiaotong University, Xi’an 710049, China
Junrui Zhang: School of Management, Xi’an Jiaotong University, Xi’an 710049, China
Hussain Muhammad Jameel: School of Management, Northwestern Polytechnical University, Xi’an 710129, China

Sustainability, 2025, vol. 17, issue 16, 1-24

Abstract: This paper investigates whether and how managerial overconfidence affects firms’ environmental information disclosure. Using 32,191 firm-year observations from Chinese companies between 2008 and 2022, the study finds that managerial overconfidence negatively impacts environmental information disclosure. These results remain robust across various tests, including alternative overconfidence measures, instrumental variable regressions, and propensity score matching. Mechanism analysis reveals that overconfidence reduces disclosure through overestimation of risk control ability and underestimation of stakeholder importance. Further analysis shows that external governance pressures from government regulation, media scrutiny, and institutional investor monitoring effectively mitigate this negative impact, while also confirming the value relevance of environmental information disclosure and the moderating role of managerial overconfidence. This study clarifies the influence and mechanisms of managerial overconfidence on environmental disclosure in developing countries, highlighting the role of external oversight.

Keywords: managerial overconfidence; environmental information disclosure; external oversight effectiveness (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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