The Psychological Mechanisms of Managerial Overconfidence in Corporate Digital Transformation: A Double-Edged Sword Effect on Executive Mental Health
Di WangAbstract
Objective
This study examines the dual effects of managerial overconfidence in corporate digital transformation investments, investigating both its driving force on innovation and its impact on investment efficiency through psychological mechanisms, with particular focus on executives' emotional disorders, anxiety, and negative emotional stress.
Subjects and Methods
The research employed a mixed-methods approach, combining quantitative analysis of 2,148 Chinese listed companies (2015-2022) with qualitative case studies of 12 manufacturing enterprises. Managerial overconfidence was measured using investment-cash flow sensitivity, media tone analysis, and executive compensation benchmarking, while mental health was assessed through anxiety scales and stress inventories. Data were analyzed using propensity score matching and fixed-effects models.
Results
Overconfident managers increased digital transformation investments by 35% but achieved 23% lower investment efficiency. The study identified a U-shaped relationship between overconfidence and transformation performance. Psychological analysis revealed that 68% of cases showed overconfidence-induced cognitive biases leading to inadequate risk assessment, with significantly higher anxiety levels (p < 0.01) and emotional stress observed in overconfident executives.
Conclusions
Managerial overconfidence presents a double-edged sword effect in digital transformation, where innovation benefits must be balanced against efficiency losses and mental health risks. Enterprises should establish psychological monitoring mechanisms and mental health support systems to optimize digital transformation outcomes while safeguarding executive well-being.
Corresponding Author
Di Wang, School of Economics and Management, Panzhihua University, Panzhihua, Sichuan, China.