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Chief financial officer overconfidence and stock price crash risk

Qiao, Lu; Adegbite, Emmanuel; Nguyen, Tam Huy

Chief financial officer overconfidence and stock price crash risk Thumbnail


Lu Qiao

Professor in Accounting and Corporate Governance

Tam Huy Nguyen


Numerous studies have shown the prevalence of overconfidence among Chief Financial Officers (CFOs). Surprisingly, the real effect of CFO overconfidence is under-researched. Using data from a large sample of US-listed firms over the period 1993–2019 and adopting an eclectic theoretical approach, we find that overconfident CFOs are more likely to increase stock price crash risk than non-overconfident CFOs through risk-taking and bad news hoarding. These findings pass a series of robustness tests. Furthermore, departing from most overconfident studies that merely examine one type of top managers (i.e., Chief Executive Officer (CEO)), we consider the influence of CEO and CFO overconfidence jointly. Interestingly, we find that CFO overconfidence outweighs CEO overconfidence in influencing stock price crash risk. Moreover, the overconfidence effect is intensified when overconfident CFOs collaborate with overconfident CEOs, thus raising stock price crash risk. However, stronger governance and a transparent information environment constrain overconfident CFOs' effect on stock price crash risk. Overall, our findings highlight the importance of CFO overconfidence in determining stock return tail risks.

Journal Article Type Article
Acceptance Date Sep 2, 2022
Online Publication Date Sep 13, 2022
Publication Date Nov 1, 2022
Deposit Date Sep 7, 2022
Publicly Available Date Mar 14, 2024
Journal International Review of Financial Analysis
Print ISSN 1057-5219
Publisher Elsevier BV
Peer Reviewed Peer Reviewed
Volume 84
Article Number 102364
Keywords Economics and Econometrics; Finance
Public URL
Publisher URL


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