The Impact of CEO              Overconfidence on Share            Collapse Under The Moderating Role of Financial Statements Opacity: Evidence from Egypt

Sharawi, Hossam Hassan Mahmoud

doi:10.21608/aljalexu.2023.320478

The Impact of CEO Overconfidence on Share Collapse Under The Moderating Role of Financial Statements Opacity: Evidence from Egypt

Document Type : Original Article

Author

Hossam Hassan Mahmoud Sharawi

Jeddah International College (JIC): Higher Institute of Computer King Marriott

10.21608/aljalexu.2023.320478

Abstract

This study explores how CEO overconfidence affects the likelihood of share collapse in the context of an emerging market, Egypt, and how the financial statements' opacity moderates this effect. 82 firms listed on the Egyptian Exchange (EGX) between 2015 and 2022 were used as a sample, and regression analysis was used to test the effect of CEO overconfidence and financial statement opacity on two share collapse measures, DUVOL (negative skewness) and NCSKEW (volatility). The study finds that CEO overconfidence and financial statement opacity positively and significantly affect share collapse. This indicates that firms with overconfident CEOs and opaque financial reporting are more vulnerable to sudden and extreme drops in share prices. The researcher also finds that the interaction between CEO overconfidence and financial statement opacity amplifies the share collapse. The study contributes to behavioral finance and share collapse literature by examining an emerging market with different institutional characteristics from developed markets.

Keywords