Pages: 31-37

Abstract

One of the important characteristics of a managers' personality is overconfidence. ‎Managers are optimistic of their business unit earnings and cash flows and have a ‎positive outlook on future risks and returns. This research examined Investors' ‎perceptions of CEO's overconfidence as an evidence of costs of equity capital. ‎Investors can perceive CEO overconfidence as a positive or negative attribute that ‎negatively signals business risk and information leading to inappropriate investment ‎decisions and positively reducing business risk and It is information that is beneficial ‎to the company and such managers tend to invest in risky and innovative projects. To ‎conduct this research, data of a five-year period was used to achieve the goals. The ‎research time domain was during 2011-2015. Eviews software was used to estimate the ‎statistics. Studies show that in Iran, despite the positive relationship between ‎overconfidence and cost of equity, there is no significant relationship, and there is no ‎linear and nonlinear relationship between overconfidence and cost of equity. There is ‎information asymmetry in the Iranian capital market. That leads to poor reporting. In ‎other words, the poor quality of reporting and the almost equal rate of financing costs ‎of all securities companies make CEO's overconfidence not affected by equity costs‎‎‎‎.