Investigating the relationship Overconfident Managers and Internal Controls over Financial Reporting

An emerging literature in finance and accounting explores the impact of overconfident managers. There is evidence that managerial overconfidence is associated with firm activities. Based on the tenets of overconfidence, we expect these managers to be more likely to maintain ineffective controls. Beacause they are overestimate their own ability and believe they can control events that are actually largely outside of their control. Based on these idea The main purpose of this research examine the association between managerial overconfidence and internal controls by using a sample of firm listed in Tehran stock exchange between 2007 to 2015. The research Hypothesis is tested utilizing panel data regression model. Our finding indicate a positive significant relationship between the managerial overconfidence and material weakness in internal control. Moreover we find no evidence that these managers are more able to mitigate the known negative consequences of ineffective internal controls (inefficient investments and lower future operating efficiency).