CEO OVERCONFIDENCE AND CORPORATE RISK-TAKING OF LISTED NGX FIRMS

This study examines the relationship between CEO overconfidence and corporate risk-taking among 148 listed firms on the Nigerian Exchange Group (NGX) over the period 2011–2025, yielding an unbalanced panel of 2,072 firm-year observations. Drawing on upper echelons theory, hubris hypothesis, and the behavioural finance paradigm, we argue that managerial overconfidence—measured through investment-cash flow sensitivity and a media-based portrayal index—significantly elevates corporate risk-taking, proxied by the rolling volatility of earnings before interest, taxes, depreciation, and amortisation (EBITDA) scaled by total assets. Employing a rigorous econometric strategy encompassing pooled ordinary least squares, fixed effects, random effects, and the two-step system generalised method of moments (GMM-SYS) to address endogeneity and dynamic bias, our findings confirm that CEO overconfidence exerts a statistically significant positive effect on corporate risk-taking (β = 0.0223; p < 0.01). Further, male CEOs, those with longer tenures, and those with advanced educational qualifications are associated with higher risk-taking propensity. Conversely, firm size, profitability, liquidity, and firm age dampen risk-taking, while leverage and firm growth amplify it. R&D intensity further moderates this relationship positively. The findings are robust to multiple post-estimation checks, including Hausman tests, Arellano-Bond diagnostics, Pesaran cross-sectional dependence tests, and Hansen J-statistics. This study makes a novel contribution to the nascent body of emerging-market behavioural corporate governance literature by situating overconfidence within Nigeria's institutional context—characterised by weak shareholder protections, concentrated ownership, and limited board independence. Policymakers, regulators, and corporate boards are urged to institutionalise rigorous psychological screening mechanisms and strengthen governance architectures to curb value-destructive overconfidence-driven risk excesses.