CFO overconfidence, environmental violations, and firm performance. The moderating role of constituency statutes

Panagiotis Andrikopoulos; Shee-Yee Khoo; Patrycja Klusak; Yurtsev Uymaz; Huong Vu

doi:10.1111/emre.70016

CFO overconfidence, environmental violations, and firm performance. The moderating role of constituency statutes

Panagiotis Andrikopoulos, Shee-Yee Khoo, Patrycja Klusak^*, Yurtsev Uymaz, Huong Vu

^*Corresponding author for this work

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Abstract

This study examines the relationship between Chief Financial Officer (CFO) overconfidence and firm performance through the lens of environmental violations and constituency statutes. Drawing on stakeholder and upper echelons theories, we find that firms with overconfident CFOs are more likely to commit environmental violations, which negatively impact their long-term performance. Our empirical evidence suggests that this effect can be moderated by the introduction of constituency statutes and violation penalties. Notably, firms with overconfident CFOs may benefit more from stakeholder-oriented laws while also incurring higher penalties for environmental violations.

Original language	English
Journal	European Management Review
Early online date	8 Jun 2025
DOIs	https://doi.org/10.1111/emre.70016
Publication status	E-pub ahead of print - 8 Jun 2025

Keywords

CFO overconfidence
constituency statutes
credit ratings
environmental violations

ASJC Scopus subject areas

Business and International Management
Strategy and Management

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abstract = "This study examines the relationship between Chief Financial Officer (CFO) overconfidence and firm performance through the lens of environmental violations and constituency statutes. Drawing on stakeholder and upper echelons theories, we find that firms with overconfident CFOs are more likely to commit environmental violations, which negatively impact their long-term performance. Our empirical evidence suggests that this effect can be moderated by the introduction of constituency statutes and violation penalties. Notably, firms with overconfident CFOs may benefit more from stakeholder-oriented laws while also incurring higher penalties for environmental violations.",

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AU - Uymaz, Yurtsev

AU - Vu, Huong

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AB - This study examines the relationship between Chief Financial Officer (CFO) overconfidence and firm performance through the lens of environmental violations and constituency statutes. Drawing on stakeholder and upper echelons theories, we find that firms with overconfident CFOs are more likely to commit environmental violations, which negatively impact their long-term performance. Our empirical evidence suggests that this effect can be moderated by the introduction of constituency statutes and violation penalties. Notably, firms with overconfident CFOs may benefit more from stakeholder-oriented laws while also incurring higher penalties for environmental violations.

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KW - constituency statutes

KW - credit ratings

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CFO overconfidence, environmental violations, and firm performance. The moderating role of constituency statutes

Abstract

Keywords

ASJC Scopus subject areas

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