CEO overconfidence and the probability of corporate failure: evidence from the United Kingdom

Jingsi Leng, Aydin Ozkan, Neslihan Ozkan, Agnieszka Trzeciakiewicz*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This paper investigates the impact of CEO overconfidence on the probability of corporate bankruptcy. Using a large dataset of UK firms, we find that firms with overconfident CEOs face a greater risk of failure. The presence of overconfident CEOs leads to a higher risk of bankruptcy in innovative environments, while the impact is insignificant in non-innovative environments. Moreover, overconfident CEOs can increase the bankruptcy risk of firms with less conservative accounting. We find that banks, as major creditors, seem to play an important role in constraining CEO overconfidence, and hence in reducing the likelihood of bankruptcy. Finally, the impact of overconfidence on the probability of bankruptcy is stronger in firms with generalist CEOs than specialist CEOs.

Original languageEnglish
Pages (from-to)1210-1234
Number of pages25
JournalEuropean Journal of Finance
Issue number12
Early online date24 Jan 2021
Publication statusPublished - 2021


  • CEO overconfidence
  • corporate bankruptcy
  • corporate governance
  • hazard model

Cite this