Joint Effect of CEO Overconfidence and Corporate Social Responsibility Discretion on Cost of Equity Capital

Jun 6, 2026

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This research note investigates the combined influence of CEO overconfidence and corporate social responsibility (CSR) discretion on the cost of equity capital. The study examines how these two factors, when considered together, impact the perceived risk and required return of equity investors. The findings suggest a significant interaction effect, where the level of CEO overconfidence can either amplify or mitigate the effect of CSR discretion on the cost of equity. Specifically, highly overconfident CEOs may engage in excessive CSR activities that do not necessarily align with shareholder value maximization, thereby increasing the cost of equity. Conversely, moderate levels of CEO overconfidence, coupled with strategic CSR discretion, might lead to a lower cost of equity by signaling positive firm attributes and reducing information asymmetry. The paper utilizes empirical data from publicly traded companies to validate these hypotheses, employing advanced econometric techniques. The journal of Contemporary Accounting & Economics is the designated publication venue for this research, aiming to contribute to the existing literature on corporate finance, governance, and accounting. The paper acknowledges the pre-proof status of the article and emphasizes that the current version is subject to copyediting and typesetting before its final publication.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages59

Reading Time2 h 29 min

Joint Effect of CEO Overconfidence and Corporate Social Responsibility Discretion on Cost of Equity Capital

FAQs

What is the primary focus of this research note?

This research note focuses on the joint effect of CEO overconfidence and corporate social responsibility (CSR) discretion on the cost of equity capital.

How do CEO overconfidence and CSR discretion interact to affect the cost of equity?

The interaction suggests that high CEO overconfidence might lead to excessive CSR activities, increasing the cost of equity, while moderate overconfidence with strategic CSR may lower it.

What is the publication status of this article?

This is a pre-proof version of an article that has undergone enhancements after acceptance and is subject to further copyediting and typesetting before its final publication.

Jun 6, 2026

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