Research On The Relationship Between Managers' Overconfidence And The Non-efficiency Investment

As the main impetus of company's development and the important foundation of the growth of future cash flow, company's investment behavior will make a direct influences on the financing decision and dividend distribution, indirectly affects the macroeconomic state of development. In the listed companies of China, there is a serious problem of non-efficiency investment, including the pervasive phenomenon of under-investment and over-investment. Whatever what's the situation, there will damage the interests of shareholders'or the investors'. Because excessive investment is a waste of limited resources and will increase the enterprise financial risk, while under-investment makes capital in idle and hinders the company from developing. Those classical financial theory which have developed to mature always explain above problems focusing on principal-agent and asymmetric information. But those theories based on the assumption of rational economic man are contradictory with the practical investment vision in themselves. At this time, the company financial theory considering the psychological characteristics of management exactly makes up that deficiency of previous theory and provides a broad development direction for investment decision theory. And the research about the influence of managements'overconfidence on enterprise investment decision-making is relatively mature and systematic.This article tries to explore the relationship between executives'overconfidence and the non-efficiency investment behavior by the combination of normative research and empirical research. Firstly, in reference to the relevant domestic and foreign research results and some theories, the paper puts forward some hypothesizes, and summarizes the measuring method of managers'overconfidence and the non-efficiency of investment. Then, construct the regression testing model with the introduction of factor of managers'overconfidence. Finally, with the statistics of Shanghai and Shenzhen A-share listed companies in 2007-2009, it tests that relationship through descriptive statistical analysis, correlation analysis and multi-line regression analysis.The following is the conclusion through the empirical analysis. The first one is that managers'overconfidence is significantly and positively related to company's non-efficiency. In addition, comparing with those managers who are not overconfidence, overconfidence managers can significantly worsen the situation of non-efficiency investment. The second point is that overconfidence managers are more tend to invest excessively. Moreover, in view for the corporate governance, the proportion of the independent directors is negatively related to the overconfidence degree of managers. That is to say, when the proportion of independent directors accounts for highly in the company, the situation of non-efficiency of investment will be suppressed.