Study On Effects Of Senior Managers’ Overconfidence On Their Dividend Payout Policy In Listed Companies

With the appearance and development of Chinese stock market, listed company hasbecome the main style of stock companies. Its special organization structure and ways ofoperating make the cash dividend distribution one of the most important decision withwhich the senior manager must be faced. And this problem attached academic andbusiness management’s keen interest. Overconfidence as a people’s regular psychologicalpreferences has made important influence on the human economic activities. Seniormanager’s overconfident psychological in Chinese company is stronger than most peoplewhich will do great and deep effect on the companies’ management decision and cashdividend policy. So it is important and necessary to study this question from theory anddemonstration deeply. It will have important theory and reality meaning to make thebusiness decision more scientific, improve operation efficiency and the level ofmanagement of Chinese listed companies and further securing Chinese stock market’shealthy、stably and continuously development.The main research work of this paper as follow:①On the basis of the current related research results, under the hypothesescondition that senior managers of listed companies are overconfident, for the goal of maxthe revenue (consist of the current cash dividend distribution and the future net asset pershare)comes from the project which invested by the company existing shareholders, thispaper sets up an appropriate mathematical model to study the effect mechanism of thesenior manager’s overconfident psychological preference on the dividend payout policy.The theories’ results show that, when the senior manager of listed company is optimisticabout the future business environment, the cash dividend and debt financing amount oflisted company would increase in his/her overconfidence, and when senior manager oflisted company is pessimistic about the future business environment, the cash dividendand debt financing amount of listed company would decrease in his/her overconfidence.The cash dividend and debt financing amount of listed company would decrease in thecompany’s stock price and the interest rate of debt financing fund, and the equityfinancing amount of listed company would increase in the company’s stock price and theinterest rate of debt financing fund.②Base on analyzing and summarizing the measurement method of overconfidencein current related research, this paper put forward a more reasonable measurement method of overconfidence. It use the data of senior managers’ shares and cash dividend betweenthe year of2004and2010as our sample and sets up an appropriate econometric model todemonstrate the effect mechanism of the senior manager’s overconfident psychologicalpreference on the dividend payout policy. At last the demonstration results show that,senior managers’ overconfident and the companies’ scale and the cash flow availability inlisted company will do a remarkable positive influence to the companies’ cash dividendwhile the companies’ asset-liability ratio do a great minus effect.