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http://ssrn.com/abstract=2097895
 
 

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Managerial Overconfidence and Accounting Conservatism


Anwer S. Ahmed


Texas A&M University - Mays Business School

Scott Duellman


Saint Louis University - Department of Accounting

July 2, 2012

Journal of Accounting Research 51 (1): 1-30
Mays Business School Research Paper No. 2012-77

Abstract:     
Overconfident managers overestimate future returns from their firms’ investments. Thus, we predict that overconfident managers will tend to delay loss recognition and generally use less conservative accounting. Furthermore, we test whether external monitoring helps to mitigate this effect. Using measures of both conditional and unconditional conservatism respectively, we find robust evidence of a negative relation between CEO overconfidence and accounting conservatism. We further find that external monitoring does not appear to mitigate this effect. Our findings add to the growing literature on overconfidence and complement the findings in Schrand and Zechman [2011] that overconfidence affects financial reporting behavior.

Number of Pages in PDF File: 46

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Date posted: July 2, 2012 ; Last revised: January 17, 2013

Suggested Citation

Ahmed, Anwer S. and Duellman, Scott, Managerial Overconfidence and Accounting Conservatism (July 2, 2012). Journal of Accounting Research 51 (1): 1-30; Mays Business School Research Paper No. 2012-77. Available at SSRN: http://ssrn.com/abstract=2097895 or http://dx.doi.org/10.2139/ssrn.2097895

Contact Information

Anwer S. Ahmed
Texas A&M University - Mays Business School ( email )
430 Wehner
College Station, TX 77843-4353
United States
Scott Duellman (Contact Author)
Saint Louis University - Department of Accounting ( email )
3674 Lindell Blvd.
St. Louis, MO 63108
United States
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