CEO Overconfidence Impact on Financing of R&D: Empirical Evidence of European Firms

This research if devoted to the analysis of how CEO overconfidence influences R&D investments and financial constraints interdependence in European companies. While conducting a research we tested investments’ dependence on several indices of financial constraints. The use of a number of variants enabled us to receive evidence in the direction of constraints impact on investments and how this relation is affected by managerial overconfidence. It is noticeable that our findings on investments negatively related to constraints correspond to investigations carried out earlier and are economically relevant. Moreover, we confirmed that CEO overconfidence positively influences the extent of investments and constraints interdependence, which is interpreted as unfavorable consequence of this behavioral bias presence. We confirmed that overconfidence reduces constraints’ impact on investments or may even remove it. So, this research correlates with former papers received and therefore could be considered as an addition to the existing base of empirical studies in behavioral economics and corporate finance.