Empirical Study On The Relationship Of Managerial Overconfidence And Listed Company Performance

As an important part of corporate finance theory, the theory of managerial overconfidence break the traditional study of "rational man" assumptions to pay more attention to the non-rational behavior in management decision-making, which promote corporate finance theory to develop more practically. However, the existing literature reveals that mechanism of how managers' irrational behavior affect company performances hasn't systemically researched. To find out how company managerial overconfidence influence company performances and enrich researches in the fields, this paper studies the relationship between overconfidence of managers and listed company performances, which becomes theoretically and practically meaningful.Based on systematic review of relevant theory and research at home and abroad and "better than average" psychological research, this paper designs excessive self-confidence concerning macro-economic development trends; There are four indicators of performance of the company, that are return on assets, corporate free cash flow per share, and operating income growth of cash ratio and the total profit. In control of some important factors affecting performances of companies, the empirical study build regression model with the statistics of Shanghai and Shenzhen A-share listed companies in 2006-2008. The descriptive statistical analysis, correlation analysis and multi-line regression analysis examine the mechanism of managerial overconfidence influencing performances of companies referring to managers invest and financial behaviors.Empirical analysis shows that overconfident managers tend to over-finance and over-invest, this kind of over-invest behavior performs by overconfident managers reduce the performance growth rate of the company, however financing activities aren't discovered that significant impact.