CEO overconfidence and the probability of corporate failure: evidence from the United Kingdom

Neslihan Ozkan, Aydin Ozkan, Agnieszka Trzeciakiewicz*, Jingsi Leng

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review


This paper investigates the impact of CEO overconfidence on the probability of corporate bankruptcy. Using a large dataset of UK firms, we find that firms with overconfident CEOs face a greater risk of failure. The presence of overconfident CEOs leads to a higher risk of bankruptcy in innovative environments, while the impact is insignificant in non-innovative environments. Moreover, overconfident CEOs can increase the bankruptcy risk of firms with less conservative accounting. We find that banks, as major creditors, seem to play an important role in constraining CEO overconfidence, and hence in reducing the likelihood of bankruptcy. Finally, the impact of overconfidence on the probability of bankruptcy is stronger in firms with generalist CEOs than specialist CEOs.

KEYWORDS: CEO overconfidencehazard model
Original languageEnglish
Article number12
Pages (from-to)1210-1234
Number of pages25
JournalEuropean Journal of Finance
Issue number12
Publication statusPublished - 24 Jan 2021

Bibliographical note

Funding Information:
We thank Chris Florackis, Phil Holmes, Robert Hudson, Andrew Stark, Abhijit Sharma, Bin Xu, audiences at 1st Financial Management and Accounting Research Conference (Limassol, Cyprus), 3rd International Corporate Governance Society Conference (Rome, Italy), and Corporate Governance and Corporate Finance Workshop held at the University of Sheffield for comments and suggestions. Any errors are entirely our own.

Publisher Copyright:
© 2021 Informa UK Limited, trading as Taylor & Francis Group.


  • CEO overconfidence, hazard model, corporate bankruptcy, corporate governance


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