The Effect of CEO Overconfidence On Firm Value

The purpose of this study is investigating the effect of managerial overconfidence on firm value stock by two indices based on risk-adjusted return and volatility is measured. Based on risk-adjusted return over the benchmark yield differential Jensen and stock return volatility is measured as the standard deviation of stock returns. The overconfidence management based on the ratio of capital expenditure and investment surplus is calculated. A sample of 90 companies selected by systematic elimination method from the companies listed in Tehran stock exchange during the years of 2010-2016. To estimate research hypothesis, weighted least squares and panel methods were used. The results of the research hypotheses testing indicated that the effect of managerial overconfidence on risk- based adjusted return is positive and significant. The results also show that managerial overconfidence has no significant effect on volatility using the ratio of capital expenditure statistically however, it has positive and significant effect by using surplus investment criteria.