The Effect of CEO Overconfidence on Overinvestment of Listed Firms in China: The Moderating Role of Board Financial Expertise

Abstract

This study develops a behavioral–resource framework to explain how managerial cognitive bias and board human capital jointly shape corporate investment decisions. We argue that CEO overconfidence distorts risk perception and induces overinvestment, whereas board financial expertise provides informational and cognitive resources that counteract such bias. Fixed-effects and system GMM estimations using panel data on listed companies in China from 2013 to 2024 show that CEO overconfidence greatly increases overinvestment, while financially astute boards lessen this effect. By integrating behavioral finance with resource dependence theory, this study shifts the governance literature from a monitoring-based explanation toward a resource-based mechanism for constraining bias-driven corporate risk-taking.