Managerial overconfidence, corporate corruption risk and the moderating role of accounting secrecy: international evidence

Purpose - This study aims to explore the relationship between CEO overconfidence and corporate corruption risk and if this relationship is moderated by accounting secrecy culture. Design/methodology/approach - Data from a sample of 1,396 international firms selected from the ESG Index between 2010 and 2022 were used to test the model using panel data and multiple regressions. This paper considered the feasible generalized least squares estimation for linear panel data models. A multiple regression model is used to examine the moderating impact of accounting secrecy culture on the relationship between CEO overconfidence and corporate corruption risk. For robustness checks, we incorporated an alternative measure of the dependent variable and assessed the influence of the legal system on our findings to gain insights into its effect on corporate corruption risk. Additionally, we conducted a GMM test to address endogeneity concerns. Findings - The empirical findings show a strong and positive correlation between the likelihood of corporate corruption risk and CEO overconfidence. Furthermore, our results show that the culture of accounting secrecy both positively impacts the likelihood of corporate corruption and moderates the association between overconfident managerial behavior and the likelihood of corporate corruption. Originality/value - First, this is the first study providing a comprehensive empirical analysis of how CEO overconfidence influences corporate corruption risk. While previous studies have predominantly explored the effect of this overconfidence on overall corporate social responsibility performance, our research distinguishes itself by specifically examining its impact on corruption risk, assessed through the lack of anticorruption performance, an aspect often overlooked in prior literature. Second, our study investigates the effect of cultural differentiation between countries, taking into account variations in the national culture of accounting secrecy, which constitutes a significant contribution to understanding the complex dynamics between CEO overconfidence and corporate corruption risk on an international scale.