Article Details
  • Published Online:
    October  2025
  • Product Name:
    The IUP Journal of Corporate Governance
  • Product Type:
    Article
  • Product Code:
    IJCG011025
  • DOI:
    10.71329/IUPJCG/2025.24.4.5-35
  • Author Name:
    Gobinda Gopal Pahari and Chandra Sekhar Mishra
  • Availability:
    YES
  • Subject/Domain:
    Management
  • Download Format:
    PDF
  • Pages:
    5-35
Volume 24, Issue 4, October-December 2025
Exploring How Power Dynamics and Overconfidence Influence CEO Compensation in India
Abstract

The paper examines how CEO overconfidence shapes CEO compensation, highlighting the role of CEO power in moderating this relationship within the strong incentive hypothesis framework. Analyzing a sample of 1,729 Indian firms from 2009 to 2023, the study finds a positive association between CEO overconfidence and compensation, as overconfident CEOs tend to expedite decision-making, address underinvestment, and pursue riskier projects, leading to higher compensation. Additionally, CEO power strengthens this relationship, with powerful CEOs exerting greater influence over the board to secure higher compensation. The study provides new insights into strategic management and finance, showing that CEO overconfidence can be a desirable trait to increase compensation. It also contributes to corporate governance literature by demonstrating that CEO power amplifies the positive effect of overconfidence on compensation.

Introduction

CEO compensation has frequently been the focus of attention because they are the most wellknown and highest paid executives. Debates over CEO compensation often focus on two principal viewpoints.