CFO Overconfidence and Cost Behavior

Clara Xiaoling Chen, Julia Nasev, Steve Yu Ching Wu

Research output: Contribution to journalArticlepeer-review


Using a large sample of U.S. firms, we provide evidence of the effect of CFO overconfidence on firms’ resource adjustment decisions. After controlling for CEO overconfidence, we find CFO overconfidence is positively associated with cost stickiness. We also find that CFO power relative to the CEO increases the positive association between CFO overconfidence and cost stickiness. Our study contributes to our understanding of the important role of CFOs in operational decisions such as resource adjustment decisions. We also extend the literature on cost behavior by highlighting managerial characteristics as an important determinant of resource adjustment decisions. Our study has important practical implications. Unlike resource adjustment decisions driven by agency problems or other incentive-related issues, such decisions driven by managerial overconfidence cannot be addressed with incentive contract designs. Promising ways to mitigate overconfidence-driven resource adjustment decisions include making overconfident managers aware of their potential behavioral biases and challenging their expectations.

Original languageEnglish (US)
Pages (from-to)117-135
Number of pages19
JournalJournal of Management Accounting Research
Issue number2
StatePublished - 2022
Externally publishedYes


  • CFO
  • cost stickiness
  • managerial characteristics
  • overconfidence
  • resource adjustment

ASJC Scopus subject areas

  • Business and International Management
  • Accounting


Dive into the research topics of 'CFO Overconfidence and Cost Behavior'. Together they form a unique fingerprint.

Cite this