Managerial overconfidence and Research and Development Expenditures

Managerial cognitive biases, particularly managerial overconfidence, have always been influential factors contributing to research and development and innovation processes of a firm. The present study thus is set to investigate the impact of managerial overconfidence on research and development costs of firms. To this end, managerial overconfidence is proxied by two measures based on investment decisions. The research hypothesis was also built upon a number of 51 firms listed on the Tehran Stock Exchange firms listed on the Tehran Stock Exchange over the period of 2012-2016, and then tested using multivariate regression model based on panel data. The findings reveal that managerial overconfidence tends to enhance research and development costs. In In addition, the results of sensitivity test suggest that In addition, the results of sensitivity test suggest that using alternative measure for calculating managerial overconfidence exerts no significant effect on the research findings, and hence the results are robust.