Managerial Overconfidence and Corporate Governance

This paper provides an investigation of the CEOs overconfidence and boards independence relationship on the stock-based compensation in the total executive’s salary. We assume that since an overconfident CEO can be harmful to the company, the Board of Directors may try to regulate this behavioral bias through incentives, in our case, increasing the share of stock-based compensation. The relevance of topic chosen is quite high since if such a relationship exists, then this may help to eliminate the harmful features of excessive confidence, while using the positive ones by creating a more independent board. To test our hypotheses, we ran the panel data regressions with fixed model on the sample of 418 US companies from 2014 to 2020. The results obtained allow us to confirm the hypothesis about existing relationship, however, since its significance turned out to be weak, further research is welcomed.