A Comprehensive Study Employing Panel Data to Analyze Managerial Overconfidence and Accounting Misstatements in Pakistan

Abstract

The core objective of this research is to establish a relationship between managerial overconfidence and accounting misstatement. However, the research demonstrates that managerial overconfidence significantly affects accounting misstatement. Overconfident managers may employ aggressive accounting approaches to project profitability, resulting in irrational projections and skewed financing and investment decisions. If the firm's decisions are not upheld, accounting misrepresentation may eventually be taken into consideration to avoid being accused of incompetence. A panel data regression model will be used to make an empirical guess about the hypothesis. This study employs Panel data for regression analysis since the board provides detailed conclusions on cross-sectional and time-series data. Data collected for this study based upon 37 companies listed on the Pakistan Stock Exchange are included in the sample from the Pakistan economy from 2013 to 2020. The study also provides direction for future research by including the function of corporate governance in controlling accounting misstatements and managerial overconfidence.