Confident Minds, Sustainable Firms? Unpacking the Impact of Managerial Overconfidence on Esg Performance in China

This study examines the effect of managerial overconfidence on environmental, social, and governance (ESG) performance using panel data from Chinese A-share listed firms between 2013 and 2023. Drawing on behavioral corporate finance theory, the research tests whether overconfident executives enhance or harm sustainability outcomes. Using detailed ESG ratings, firm-level data, and robust panel regression models, the results show that managerial overconfidence has a significant positive effect on environmental, social, governance, and overall ESG performance. The strongest effect appears in the social dimension, suggesting that confident leaders are particularly active in driving social initiatives. Robustness checks using instrumental variable approaches confirm the validity of the findings. These results contribute to the literature by showing that overconfidence, often seen as a risk factor, can act as a catalyst for sustainability improvements when properly balanced. The study offers practical insights for boards, investors, and policymakers on how leadership traits shape corporate ESG outcomes and suggests future research should explore the interaction of internal and external drivers in different market contexts.