CEO Overconfidence and Fair Value Reporting-the Moderating Effect of Corporate Governance

Abstract

This project examines whether CEO overconfidence affects firm's fair value reporting. Moreover, prior literature indicates effective corporate governance mechanisms ameliorate the adverse impact of CEO overconfidence. Thus, this paper further investigates whether effective corporate governance will mitigate the association between CEO overconfidence and level 3 fair values. Using a US sample drawn from 2008 to 2011, the results of this paper show that firms with higher CEO overconfidence report more Level 3 fair values and gains from Level 3 fair values. The results also indicates that the positive relationship between higher CEO overconfidence and Level 3 fair values reporting is attenuated for firms with high corporate governance.