The Effect of Managerial Overconfidence on Stock Price Crash Risk: The Moderating Role of Institutional Ownership – Evidence from Firms Listed on the Tehran Stock Exchange

This study empirically investigates the impact of managerial overconfidence on stock price crash risk and examines the moderating role of institutional ownership within the Tehran Stock Exchange. Utilizing a panel dataset of non-financial firms continuously listed from ۲۰۱۹ to ۲۰۲۴, the research employs firm-fixed effects regression models to rigorously control for unobserved heterogeneity. Rooted in agency theory and the bad news hoarding hypothesis, the findings reveal a statistically significant positive relationship between managerial overconfidence and future crash risk. Overconfident executives systematically withhold adverse financial information to protect their compensation and reputation, precipitating sudden market corrections when the accumulated bad news is eventually disclosed. Crucially, the analysis demonstrates that strong institutional ownership effectively mitigates this detrimental phenomenon. As sophisticated monitors, institutional investors constrain the opportunistic hoarding of bad news and enforce timely, transparent disclosures. These results highlight the vital necessity of robust external monitoring mechanisms to safeguard emerging market stability against executive cognitive biases.This study empirically investigates the impact of managerial overconfidence on stock price crash risk and examines the moderating role of institutional ownership within the Tehran Stock Exchange. Utilizing a panel dataset of non-financial firms continuously listed from ۲۰۱۹ to ۲۰۲۴, the research employs firm-fixed effects regression models to rigorously control for unobserved heterogeneity. Rooted in agency theory and the bad news hoarding hypothesis, the findings reveal a statistically significant positive relationship between managerial overconfidence and future crash risk. Overconfident executives systematically withhold adverse financial information to protect their compensation and reputation, precipitating sudden market corrections when the accumulated bad news is eventually disclosed. Crucially, the analysis demonstrates that strong institutional ownership effectively mitigates this detrimental phenomenon. As sophisticated monitors, institutional investors constrain the opportunistic hoarding of bad news and enforce timely, transparent disclosures. These results highlight the vital necessity of robust external monitoring mechanisms to safeguard emerging market stability against executive cognitive biases.

کلیدواژه ها:

Managerial Overconfidence ، Stock Price Crash Risk ، Institutional Ownership ، Behavioral Finance ، Information Asymmetry ، Tehran Stock Exchange ، Panel Data Analysis