How do overconfident CEOs respond to regulation fair disclosure? Evidence from financial report readability

•This study investigates how overconfident CEOs adjust financial report readability in response to regulation fair disclosure (RegFD).•Using a difference-in-differences approach, we find that firms with overconfident CEOs improve financial report readability, compared to firms with non-overconfident CEOs, due to the adoption of RegFD.•The relative improvement is more pronounced for firms with more financial constraints and for firms that conduct seasoned equity offerings during the post-RegFD periods.•We provide the first evidence that leveling the playing field in the information environment can mitigate the dark side of overconfident CEOs on disclosure quality. This paper examines how overconfident CEOs adjust financial report readability (FRR) in response to Regulation Fair Disclosure (RegFD). Our difference-in-differences analysis shows that while being associated with lower readability ex ante, overconfident CEOs increase their firms' FRR relatively to non-overconfident peers after the importance of public disclosure grows due to RegFD adoption. We also find that the relative increase in readability is dependent on the extent of firms' financial constraints and financing through the equity market. Overall, our results suggest that overconfident CEOs fine-tune FRR to reduce the external equity financing cost, especially when selective disclosure and communication are restricted.