Examining the Interactive Effect of Digital Transformation on Explaining the Relationship Between Managerial Overconfidence and Corporate Innovation

Articles in Press

Document Type : Original Article

Authors

1 Assistant Professor, Department of Accounting, Faculty of Management, Economics and Accounting, Payame Noor University, Tehran, Iran.

2 Assistant Professor, Department of Accounting, Payam Noor University, Tehran, Iran.

10.22108/far.2025.144480.2109

Abstract

Purpose: This study aims to examine the interactive effect of digital transformation on explaining the relationship between managerial overconfidence and corporate innovation. Technological advancements and the development of digital technologies have significantly influenced the characteristics of economies and businesses, driving organizations to adopt technologies such as artificial intelligence, big data, and the Internet of Things. Managerial overconfidence, as a key behavioral trait, can impact strategic decision-making and organizational innovation.

Methodology: Data from 113 companies listed on the Tehran Stock Exchange over the period of 2016 to 2023 were collected and analyzed using Excel 2013 and Stata software. Hypotheses were tested using statistical methods, including stationarity, heteroscedasticity, serial autocorrelation, multicollinearity, and the F-Limer test. Models were estimated using Generalized Least Squares (GLS) regression with two-way fixed effects.

Findings: The results indicate that: 1) Managerial overconfidence significantly enhances corporate innovation, with overconfident managers showing a greater tendency to support creative projects; 2) Digital transformation is positively and significantly related to corporate innovation, boosting investment in innovative activities; 3) An increase in managerial overconfidence reduces digital transformation, as decisions lacking thorough analysis can impair transformation efficiency; 4) Digital transformation acts as a full mediator in the relationship between managerial overconfidence and corporate innovation (Sobel test: t = 2.306, p = 0.0132). Control variables such as return on assets and financial leverage had a significant positive impact on innovation, while firm size was insignificant.

Keywords

Main Subjects

Financial Accounting Research

Articles in Press, Accepted Manuscript
Available Online from 09 June 2025

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History

  • Receive Date: 24 February 2025
  • Revise Date: 09 June 2025
  • Accept Date: 09 June 2025

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