Past empirical literature obtained a mixed result about the effect of board independence on firm performance. This study extends the issue by considering insider overconfidence. The insiders consist of directors and supervisors (hereafter DAS) as well as CEO; their annual overconfidence situations are separately measured by annual changes in their share-holding conditions. The performance is the operating- and market-related indexes, i.e., return on assets (containing two variables by whether adjusting industry median) and Tobin’s Q. Using Taiwan’s stock listed and OTC firms from 1996 to 2015 as a sample, the findings by regression analyses are that hiring independent DAS has poor performance and mainly reflects on the operating performance. Without hiring independent DAS and all insiders are non-overconfident have better performance. The condition that hiring independent DAS and all insiders are overconfident has the worse performance, but if only part of the insiders is overconfident, the performance can be improved. In short, overconfidence really reduces the performance, in particular when hiring independent DAS.
