Financial Distress Prediction: The Role of CEO Overconfidence and Profitability as Moderating
DOI:
https://doi.org/10.56070/ibmaj.v5i2.317Keywords:
CEO Overconfidence, Profitability, Financial DistressAbstract
This study aims to determine the effect of CEO overconfidence on financial distress with profitability as a moderating in oil and gas producer companies that have ESG High Risk and are listed on the London Stock Exchange Group (LSEG) during the period 2018-2022. Using test panel data regression and moderated panel data regression analysis of 225 observations, the result shows that CEO overconfidence with a proxy of overinvestment, has a significant negative effect on financial distress, while the DER and dividend do not affect financial distress. Profitability can strengthen the influence of CEO overconfidence, proxied by DER on financial distress. This finding shows that the CEO’s decision to invest with large capital can minimize the risk of financial distress. Profitability as a moderating factor strengthens the effect of DER on financial distress, showing that the profit does not quickly cover the capital issued. This study provides empirical evidence that decisions made by CEO regarding investments do not always negative impact on the company’s financial distress.
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