Title: The effect of unconditional conservatism on the effectiveness of investment policies through overconfidence in the French context

Authors: Wafa Kchaou; Wafa Lehyani; Salah Ben Hamad

Addresses: LEG Research Laboratory, Faculty of Economics and Management, University of Sfax, Sfax, Tunisia ' LEG Research Laboratory, Institute of Higher Commercial Studies, University of Sfax, Sfax, Tunisia ' Faculty of Economics and Management, University of Tunis El Manar, Tunis, Tunisia

Abstract: In this paper, we first present a practical analysis of the reciprocal relationship between unconditional accounting conservatism and managerial overconfidence. Second, we examine the accounting conservatism effect on the investment policy effectiveness in the French context. The analysis sample includes non-financial companies listed on SBF 250 market with the period 2009-2017. We determine, through this analysis, whether accounting conservatism mitigates the optimism of over-confident managers, knowing that they generally tend to overestimate future returns on investments, exercise less prudent accounting practices and over-invest in capital projects. Basically, this research aims to verify the type of moderating effect that accounting conservatism provides for investment policy effectiveness, and the reduction of related behavioural bias generated by overconfidence. Empirical results allow elucidating this relationship and removing the ambiguity of the accounting conservatism role on over-investment processes. The conclusions partly opposed to those established in the literature on other analytical samples.

Keywords: unconditional accounting conservatism; investment policies; managerial overconfidence; overinvestment; dynamic panel.

DOI: 10.1504/IJESB.2022.126713

International Journal of Entrepreneurship and Small Business, 2022 Vol.47 No.2/3, pp.203 - 238

Received: 05 Mar 2021
Accepted: 22 Jun 2021

Published online: 03 Nov 2022 *

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