Multidisciplinary Journal of Science and Technology

CEO Overconfidence and Corporate Investment: Evidence, Implications, and the Moderating Role of Governance

Al-Bukhoriy Madinakhon

Manager of Business and Tourism Development Unit

Abstract

This article examines the impact of CEO overconfidence on corporate investment decisions, drawing on empirical evidence from large publicly listed firms. Overconfident CEOs tend to overestimate project returns and perceive external financing as excessively costly, leading to overinvestment when internal funds are abundant and underinvestment when external financing is required. These distortions are particularly acute in equity-dependent firms and have implications for firm value and performance. The article also explores the moderating effect of corporate governance, which can restrain excessive investment by overconfident CEOs and improve firm outcomes. The findings underscore the importance of behavioral factors in financial decision-making and highlight the need for robust governance mechanisms.

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