The impact of managerial overconfidence on financial distress and moderating effect of family business characteristics

This study examines the effect of managerial overconfidence and family business characteristics on financial distress. We then investigate whether family characteristics can moderate the effect of managerial overconfidence on financial distress. Finally, we try to clarify whether there is a moderating effect related to family or non-family CEOs. The sample includes Taiwanese listed and OTC companies, and Logit regression is used for analysis. The empirical results show that overconfident CEOs in non-family businesses and non-overconfident CEOs in family businesses are significantly and negatively correlated with financial distress, respectively. However, the relationship between managerial overconfidence and financial distress is positively moderated by family business characteristics and this moderating effect is mainly caused by family CEOs.