CEO Power and Overconfidence: the Impact on Financial Leverage of Russian Firms

This master’s thesis investigates the link between two behavioral factors: decision making power and overconfidence of chief executive officers, and financial leverage in the context of Russian emerging market with post-soviet environment. Using a sample of 140 firms listed on Russian Stock Exchange during the 2015, it was found negative influence of CEO power and Overconfidence measures on capital structure of Russian firms, while there was significant positive non-linear relation between CEO power and debt-to-equity-ratio. Obtained results were tested through industry analysis and the neural network methods. Industry breakdown showed that for Materials and the scope of others industries (about ½ of sample) there exists strong CEO power influence on financial decision about capital structure of the company. At the same time for Telecommunication services and for Industrials there exists a link between CEO Overconfidence, the scope of financial indicators and financial leverage of the company. The neural network method supports the results obtained in previous research in terms of the importance of including behavioral factors in the model.