CEO Power, Managerial Overconfidence, and Corporate Risk-Taking in Nigerian Listed Firms

This study examines the relationship among CEO power, managerial overconfidence, and corporate risk-taking across 151 firms listed on the Nigerian Exchange Group (NGX) from 2010–2024. Drawing on upper echelons theory, agency theory, and the hubris hypothesis, the paper investigates how the concentration of power in the CEO and overconfident managerial behavior influence the extent to which firms pursue risky strategies. Using an ex-post facto research design and panel regression analysis — incorporating both fixed-effects and random-effects estimators — we find that CEO power, measured by a composite index of CEO duality, tenure, founder status, and share ownership, is positively and significantly associated with corporate risk-taking. Managerial overconfidence, proxied by excessive capital expenditure relative to industry median and earnings forecast bias, also exhibits a strong positive relationship with risk-taking, measured as the volatility of return on assets and research and development intensity. The interaction between CEO power and managerial overconfidence amplifies risk-taking behavior, suggesting a compounding effect. After controlling for firm size, firm age, board size, board independence, industry type, financial leverage, and ownership structure, the results remain robust. Post-estimation diagnostics — including the Hausman test, variance inflation factor (VIF), Wooldridge test for autocorrelation, and the modified Wald test for heteroskedasticity — confirm the reliability of the estimates. The findings hold practical implications for regulators, shareholders, and corporate boards in Nigeria, pointing to the need for governance mechanisms that temper unchecked CEO authority and overconfident decision-making. The study contributes to the nascent but growing literature on behavioral corporate finance in emerging markets, particularly Sub-Saharan Africa, by providing large-sample, longitudinal evidence from a context where institutional voids and weak governance structures make the consequences of managerial discretion especially consequential.