Managerial Overconfidence Assessment Model: An Emerging Market Context

Abstract

Managerial Overconfidence is an important behavioral bias in finance and accounting literature. Despite of wide-variety researches on the bias, there are challenges to assess overconfidence for researchers and other interested groups. By using a mixed approach including literature review, interviews with experts and Screening Fuzzy Delphi, The paper develops a model to assess the bias. The results show the managerial overconfidence assessment model has two dimensions called internal and external that both have three aspects including “better than average effect”, “optimism” and “illusion of control”. Moreover, the results show the Delphi panel’s experts believe overconfidence indices used by recent Iranian studies including over-investment and optimistic management earnings forecasts proxies are not valid to assess managerial overconfidence in Tehran Securities Exchange as an emerging market. The paper’s developed model represents valid indices to assess managers’ overconfidence can be used by the research findings’ users.

Keywords: Managerial Overconfidence, Interview, Fuzzy Delphi, Internal and External Dimensions, Overconfidence Aspects

JEL Classification: G02, M49