The Impact of Corporate Governance Mechanisms on the Relationship Between Managerial Overconfidence and Earnings Quality: An Empirical Study.

This research aims to examine the impact of governance mechanisms on the relationship between managerial overconfidence and earnings quality. The study explores the interactive effect of internal governance mechanisms—such as board characteristics, ownership structure, and audit committees—and managerial overconfidence on accounting earnings quality. It also investigates the influence of external governance mechanisms on this relationship. The study was conducted on a sample of 265 observations from 81 companies listed on the Kuwaiti market over the period from 2020 to 2023. Findings reveal a significant impact of the interactive relationship between managerial overconfidence and certain board characteristics, specifically board independence and board size, on earnings quality. The results also demonstrate a significant impact of the interaction between managerial overconfidence and various audit committee characteristics, including committee independence, size, number of meetings, and financial expertise, on earnings quality. Additionally, the study identifies a significant effect of the interaction between managerial overconfidence and certain ownership structure characteristics, specifically institutional ownership and family ownership, on earnings quality. Finally, a positive significant effect was observed for the interaction between managerial overconfidence and external governance mechanisms, specifically the size of the external auditor, on accounting earnings quality.