The Moderating Effect of Firm Value and Liquidity on the Relationship between Managerial Overconfidence and R&D

Overconfident managers, who tend to overestimate their capabilities, underestimate the possibility and impact of side effects in projects. The purpose of this study is to review the influence of managerial overconfidence on research and development (R&D) expenditures and the moderating effect of firm value and liquidity on this relationship. To this end, 51 companies were chosen from oil, gas and petrochemical companies listed on the Tehran Stock Exchange over the period of 2012-2017. This research, within three basic hypotheses, is analyzed by Eviews software and shows that managerial overconfidence has a positive effect on research and development. Company liquidity has also a direct effect on relationship between managerial overconfidence and R&D, but the firm value does not meaningfully affect the relationship between managerial overconfidence and R&D.