An Empirical Study On The Effect Of Managerial Overconfidence On Chinese Corporate Finance Decision

With the emerging of corporate finance, the relationship between managers’ irrational behavior and corporate financial decision, especially the relationship between managers’overconfidence and corporate financial decision has become a hot issue. At present, in our country, however, the researches on behavior corporate finance are on the primary stage. Based on the study of behavioral finance and discarded the hypothesis of managerial rationality that is claimed by the classical corporate finance theory, this paper discussed the influence of managerial overconfidence on Chinese corporates’financing policy, that not only has the academic value but also the applied value.In order to analyse the relationship between managers’overconfidence and corporate’s financing policy, this paper mades empirical studies on Shanghai and Shenzhen stock markets from2005to2010on the basis of controlling other elements. The main results are as follows:managers’overconfidence and corporates’ asset-liability ratio have a positive correlation; overconfident managers are apt to short-term debt; overconfident managers are inclined to use credit financing. As a result, this paper infer that managerial overconfidence is a important factor that influence the capital structure, the structure of debt deadline and credit debt.Based on both academic and empirical study, this paper has made conclusions as follows:managers’overconfidence is the significant factor that influence the capital structure, cause the corporates to adopt radical behavior in incurring more short-term debts and use more credit debts.