Behavioural biases and corporate sustainability: effect of managerial overconfidence on ESG performance
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2025-07-07
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en
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This thesis examined the effect of managerial overconfidence on corporate sustainability, using fixed effects panel data regressions in R that analysed 210 companies from Europe and the United Kingdom over the period 2015 to 2023. The results reveal no effect of managerial overconfidence on the environmental performance, and a positive effect of managerial overconfidence on the social, governance and overall sustainability performance. This indicates that, to improve corporate sustainability, companies must not only look at the knowledge and skills of potential managers, but they should also consider behavioural traits like managerial overconfidence. Even though the hypotheses were based on existing literature, these findings only support the second and last hypothesis, and contradict the first and third hypothesis, which highlights the complexity of behavioural biases in the sustainability field. Robustness checks reveal that the results are robust to the inclusion of country-income to account for a potential income-bias, and the simplification of the model by excluding CEO-specific characteristics and the COVID-19 period from the analysis. However, other robustness checks reveal that the observed effects are sensitive to the inclusion of firm-fixed effects, as well as the measurement approach of managerial overconfidence, which requires cautious interpretation and future research.
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Faculteit der Managementwetenschappen