The Impact of Managerial Overconfidence on Financial Distress and Moderating Effect of Family Business Characteristics

Hung, J. H., Wang, W. S., Li, I. C., Chen, H. J., and Chang, W. S. 2013. The Impact of Managerial Overconfidence on Financial Distress and Moderating Effect of Family Business Characteristics. NTU Management Review, 23 (2): 65-96. https://doi.org/10.6226/NTURM2013.SEP.R10043

Jung-Hua Hung, Professor, Department of Business Administration, National Central University
Wen-Sheng Wang, Ph.D. Student, Department of Business Administration, National Central University
I-Cheng Li, Ph.D. Department of Business Administration, National Central University
Hsiang-Ju Chen, Associate Professor, Department of International Trade, National Taichung Institute of Technology
Wei-Shan Chang, MBA, Department of Business Administration, National Central University

Abstract

This study examines the effect of managerial overconfidence and family business characteristics on financial distress. We then investigate whether family characteristics can moderate the effect of managerial overconfidence on financial distress. Finally, we try to clarify whether there is a moderating effect related to family or non-family CEOs. The sample includes Taiwanese listed and OTC companies, and Logit regression is used for analysis. The empirical results show that overconfident CEOs in non-family businesses and non-overconfident CEOs in family businesses are significantly and negatively correlated with financial distress, respectively. However, the relationship between managerial overconfidence and financial distress is positively moderated by family business characteristics and this moderating effect is mainly caused by family CEOs.  


Keywords

family businessoverconfidencefinancial distress


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