The Effectiveness of Cognitive-Behavioral Financial Therapy on Overconfidence Behavior
Keywords:
financial therapy based on cognitive behavior, financial behavior, trustworthinessAbstract
The present study aimed to determine the effectiveness of cognitive-behavioral financial therapy in reducing overconfidence behavior and its dimensions among individuals with a history of financial bankruptcy. This study employed a quasi-experimental pretest–posttest design with a control group. The statistical population consisted of individuals who had experienced financial bankruptcy and were identified using a financial bankruptcy screening checklist. Forty participants were selected through purposive sampling and randomly assigned to an experimental group (n=20) and a control group (n=20). The experimental group received a 12-session cognitive-behavioral financial therapy intervention, whereas the control group received no intervention. Data were collected using a behavioral bias questionnaire assessing overconfidence and its components, including hindsight bias, overestimation, and self-superiority. Data analysis was conducted using multivariate analysis of covariance (MANCOVA) and Bonferroni post hoc tests. The MANCOVA results indicated significant group differences in all dimensions of overconfidence after controlling for pretest scores. Significant effects were observed for hindsight bias (F=8.952, η²=0.204, p=0.005), overestimation (F=8.464, η²=0.195, p=0.006), and self-superiority (F=10.783, η²=0.236, p=0.002). Bonferroni comparisons further demonstrated significant differences between the adjusted posttest means of the experimental and control groups across all dimensions, indicating a substantial reduction in overconfidence among participants who received the intervention. Cognitive-behavioral financial therapy appears to be an effective intervention for reducing overconfidence by modifying dysfunctional financial beliefs, enhancing cognitive restructuring, and increasing awareness of judgmental biases. The findings suggest that this approach can improve financial decision-making quality and reduce maladaptive financial behaviors among financially distressed individuals.
Downloads
References
Barber, B. M., Huang, X., Ko, J., & Odean, T. (2019). Leveraging Overconfidence.
Beck, J. S. (2011). Cognitive Behavior Therapy: Basics and Beyond (2nd ed.). Guilford Press.
Beck, J. S. (2021). Cognitive Behavior Therapy: Basics and Beyond (3rd ed.). Guilford Press.
Berthet, V. (2021). The Measurement of Individual Differences in Cognitive Biases: A Review and Improvement. Frontiers in psychology, 12, 630177.
Campbell, T. C., Gallmeyer, M., Johnson, S. A., Rutherford, J., & Stanley, B. W. (2011). CEO Optimism and Forced Turnover. Journal of Financial Economics, 101(3), 695-712.
Cebeci, G. T. (2024). Intergenerational Transmission of Financial Biases. Journal of Behavioral and Experimental Economics, 111, 102234. https://doi.org/10.1016/j.socec.2024.102234
Deaves, R. (2024). Household Finance: An Introduction to Individual Financial Behavior. Oxford University Press.
Dobson, K. S., & Dozois, D. J. A. (2019). Handbook of Cognitive-Behavioral Therapies (4th ed.). Guilford Press.
Hajewski, D. (2010). Former Koss Corp. Executive Sachdeva Sentenced to 11 Years in Prison. JS Online. http://www.jsonline.com/business/108706
Hirshleifer, D., Low, A., & Teoh, S. H. (2012). Are Overconfident CEOs Better Innovators? The Journal of Finance, 67(4), 1457-1498.
Hoffrage, U. (2022). Overconfidence. In Cognitive Illusions: Intriguing Phenomena in Thinking, Judgment, and Memory (3rd ed., pp. 210-227). Routledge. https://doi.org/10.4324/9781003154730-21
Hofmann, S. G., Asnaani, A., Vonk, I. J. J., Sawyer, A. T., & Fang, A. (2012). The Efficacy of Cognitive Behavioral Therapy: A Review of Meta-Analyses. Cognitive therapy and research, 36(5), 427-440. https://doi.org/10.1007/s10608-012-9476-1
Horwitz, E. J., & Klontz, B. T. (2013). Understanding and Dealing with Client Resistance to Change. Journal of Financial Planning, 26(11), 27-31.
Kahneman, D. (2011). Thinking, Fast and Slow. Farrar, Straus and Giroux.
Kaufmann, C., & Weber, M. (2022). Overconfidence and Learning from Experience in Financial Decision-Making. Journal of Behavioral Finance, 23(3), 312-328.
Klontz, B. (2011). Behavior Modification. Financial Planning Magazine. http://www.financial-planning.com/fp_issues/2011_4/behavior-modification-2672132-1.html?pg=3&
Klontz, B., Kahler, R., & Klontz, T. (2016). Facilitating Financial Health: Tools for Financial Planners, Coaches, and Therapists (2nd ed.). The National Underwriter Company.
Klontz, B. T., & Britt, S. L. (2012). How Clients' Money Scripts Predict Their Financial Behaviors. Journal of Financial Planning, 25(11), 33-43.
Klontz, B. T., Britt, S. L., Mentzer, J., & Klontz, T. (2011). Money Beliefs and Financial Behaviors: Development of the Klontz Money Script Inventory. The Journal of Financial Therapy, 2(1), 1-22. https://doi.org/10.4148/jft.v2i1.451
Kumar, S., & Goyal, N. (2021). Behavioural Biases in Investment Decision Making: A Systematic Literature Review. Qualitative Research in Financial Markets, 13(2), 189-221. https://doi.org/10.1108/QRFM-03-2020-0023
Marzouki, A., & Ben Amar, A. (2025). Managerial overconfidence, corporate corruption risk and the moderating role of accounting secrecy: international evidence. International Journal of Accounting & Information Management. https://doi.org/10.1108/IJAIM-09-2024-0349
Mehri, B., & Ghasemaghaei, M. (2025). The Impact of Metacognitive AI on Appropriate Reliance in AI-Assisted Decision-Making: The Role of Trust Resilience and Critical Thinking. AMCIS 2025 Proceedings, https://aisel.aisnet.org/amcis2025/sig_odis/sig_odis/27/
Oliver, B. R. (2009). Managerial Overconfidence and Dividend Policy. SSRN Electronic Journal.
Ololo, K. O., Onyishi, I. E., & Nwonyi, S. K. (2023). Rational Emotive and Cognitive Behavior Coaching Intervention for Promoting College Students' Financial Risk Tolerance and Attitudes towards Financial Risk. Journal of Rational-Emotive & Cognitive-Behavior Therapy, 42(2), 398-418.
Otani, K., Suzuki, A., Matsumoto, Y., & Shirata, T. (2018). Link of Negative Core Beliefs about the Self with Perceived Dysfunctional Parenting. Psychiatry research, 270, 715-719. https://doi.org/10.1016/j.psychres.2018.10.060
Pires, R. J. A. (2020). A Review of Overconfidence in Behavioral Finance. Journal of Management and Business Review, 4(3), 71-78.
Sohrabi Kartabad, A. (2024). CEO Overconfidence and Future Earnings Management. Quarterly Journal of New Research Approaches in Management and Accounting, 8(94), 1287-1301.
Taheri, S., & Shafiee, P. (2024). The Impact of Bank Managers' Overconfidence on Banking Stability Considering Regulatory Capital Requirements and Capital Adequacy in Iran. Quarterly Journal of Fiscal and Economic Policies, 12(47), 127-158. https://doi.org/10.61186/qjfep.12.47.127
Tomak, S. (2013). The Impact of Overconfidence on Capital Structure in Turkey. International Journal of Economics and Financial Issues, 3(2), 512-518.
Winterfeldt, D. V., & Edwards, W. (2015). Cognitive and Motivational Biases in Decision and Risk Analysis. Risk Analysis, 35(7), 1230-1251.
Xiao, W., Bo, H., Fang, H., Li, Y., Chen, W. Y. C., & Ye, T. (2025). The Influence of Cognitive and Affective Trust on the Utilization of Family Doctor Services: A Chinese Cross-Sectional Survey Based on McAllister’s Theory. Patient Preference and Adherence, Volume 19, 1463-1473. https://doi.org/10.2147/ppa.s504605
Downloads
Published
Submitted
Revised
Accepted
Issue
Section
License
Copyright (c) 2025 Mohammad Goodarzi, Mohammadhamed Khanmohammadi, Mohammad Esmail Molai, Tahereh Mahmoudiyan Dastnaee (Author)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
