Research On The Impact Of CEO Overconfidence On The Relation Between It Investment And Firm Performance

Overconfidence has been one of the most stable discoveries in psychological research.A large number of studies show top executives are more likely to be overconfident,so it is meaningful to gain a deeper understanding of managerial overconfidence.Previous studies find that CEO overconfidence can produce a significant impact on corporate behaviors,decisions,strategies,and outcomes,such as overinvestment,plenty of value-destroyed mergers and acquisitions(M&A),distorted financial policies,and so on.Prior research mainly focuses on the dark side of CEO overconfidence.However,previous research results lead to the confusion that if overconfident CEOs are so bad,then why companies hire them.Based on this confusion,some recent studies begain to explore the bright side of CEO overconfidence,such as exploration,risk-taking,invovation,and so on.This paper also tries to find some positive effects of CEO overconfidence,but differs from prior studies to focus on corporate IT investment activities.Based on Upper Echelon Theory and Resource-based View,this paper constructs a theory model to examine the significant role of CEO overconfidence in the relation between IT investment and firm performance,as well as the mechanisum and the environmental and organizational boundary conditions of this effect,by adopting Heckman two-step model,moderating path analysis,and subgroup test.Firstly,this paper examines the moderating effect of CEO overconfidence on the relation bwtween IT investment and firm performance.Secondly,this paper examines the moderating path of CEO overconfidence on the relation bwtween IT investment and firm performance.As CEOs are the most powerful men in the companies,their psychological and cognitive attributs may exert a significant impact on corporate decisions and behaviors.So in addition to the influence of its own on IT-performance relation,overconfident CEOs may also influence the relationship between IT investment and corporate performance through corporate decisions and strategies(e.g.R&D spending).Thirdly,this study examines the environment boundary conditions of the moderating effect and moderating path of CEO overconfidence on the relation bwtween IT investment and firm performance.Finally,this study examines the organizational boundary conditions of the moderating effect and moderating path of CEO overconfidence on the relation bwtween IT investment and firm performance.The empirical results of this study show: firstly,CEO overconfidence has significant positive moderate effects on that relationship between IT investments and firm performance,which indicates that CEO overconfidence is an important IT complementary resource that can strengthen IT-performance relation.Secondly,R&D expenditure mediates the moderating effect of CEO overconfidence on the effect of IT investments in firm performance.Not only CEO overconfidence has significant positive moderate effects on that relationship between IT investments and firm performance,but also overconfidence CEO spends more on R&D and results in stronger absorptive capacity,which is conducive to exploit potentialities of IT investments in fir m performance.Thirdly,CEO overconfidence has significant positive moderating effects on that relationship between IT investments and firm performance,especially in high technological dynamism environment,high information intensity environment and high competitive intensity environment.However,this effect also has boundary effect,in low technological dynamism environment and low information intensity environment,CEO overconfidence's moderate effect becomes negative.Fourthly,the moderating path of CEO overconfidence on IT-performance relation through R&D spending is stronger in high technological dynamism environment,high information intensity environment and high competitive intensity environment.Fifthly,the moderating effect of CEO overconfidence on IT-performance is stronger in nonstate-controlled enterprises,small companies,and young companies.Finally,the moderating path of CEO overconfidence on IT-performance relation through R&D spending is stronger in in nonstate-controlled enterprises,and small companies,which indicates this moderating path varies across organizations.This study develops IT payoff literature and overconfidence literature.On the one hand,although early IT payoff literature has explored CEOs' role in IT,prior studies mainly focus on CEOs' support or CEOs' participation in IT,which have largely neglected the impact of CEOs' psychological and cognitive characteristics on the relation between IT investment and firm performance.This paper firstly integrates CEO overconfidence with IT payoff literature,especially focusing on the moderating effect,path,and boundary conditions of CEO overconfidence on the relation between IT investment and firm performance.This study helps gain deeper insights into the role of CEOs' psychological and cognitive characteristics(i.e.overconfidence)in the relation between IT investment and firm performance.On the other hand,some recent studies begain to explore the bright side of CEO overconfidence,this paper differs from these studies to explore the role of CEO overconfidence in corporate IT activities.The results of this study find that CEO overconfidence has a positive influence on IT-performance relation,which helps gain a deeper understanding of CEO overconfidence.However,it is worth noting that though CEO overconfidence can produce a positive impact on the relation between IT investment and fir m performance,it still has a negative effect on firm performance overall.