CEO overconfidence and corporate social responsibility: exploring the moderating role of governance

Purpose The current research aims to reconnoitre the nexus between Chief Executive Officer’s overconfidence and firm’s corporate social responsibility (CSR) practices. Additionally, an endeavour has been made to unravel the interaction effect of governance mechanisms on this association. Design/methodology/approach This investigation revolves around a sample of 200 Indian enterprises listed on the Bombay Stock Exchange for nine years from 2015 to 2023. Panel regression analysis has been used to examine the hypothesized relationships. Findings The panel regression results demonstrate that overconfident executives negatively impact the CSR expenditure of firms as they tend to underestimate the resources needed from stakeholders for their companies’ survival and growth. Hence, they are less inclined to address stakeholder demands, resulting in reduced engagement in CSR activities. The authors also highlighted that the interaction of CEO confidence and governance has a substantial and positive influence on CSR engagement. This implies that organizations with robust governance mechanisms can counteract the adverse effects of CEO overconfidence on CSR, transforming the previously detrimental association into a favourable one. Practical implications This research provides valuable insights to policymakers, stakeholders and corporations by highlighting the behavioural determinant of CSR practices. Originality/value The key differentiation of this work lies in examining the connection between executive confidence, corporate governance and CSR initiatives in an emerging economy, i.e. India. Moreover, this work distinctively integrates a comprehensive governance index as a moderating factor, instead of relying on a single governance indicator, to understand the complex intricacies of the aforementioned relationship.