Research On The Mechanism Of Managerial Overconfidence To Company Performance

With the end of2008financial crisis sweeping China’s real economy, Ourcountry’s GDP growth rate is in a downward trend.In today’s complex economicenvironment, the external environment has undergoned drastic changes and evolution.The correct corporate investment decisions not only give the company to bring inhuge profits and enhance the corporate image, It will be an essential role to make acompany to occupy a favorable position in the market and maximize its value.Thecompany’s managers how to properly treat the investment opportunities become thebreakthrough of maximize the value of a company. However the traditional FinancialTheory becames difficult to explain the alienation of the investment in the markettoday, company managers in decision-making often exhibit overconfidence, framedependence, herd mentality, self-attribution what are the psychological bias thatdeviation from the optimal decision. This phenomenon has been drawed widespreadconcerns in academic circles. Amang them,the overconfidence in judgment anddecision-making process is the most stable psychological characteristics. Thus thepaper depature from the point of company managers’ overconfidence,take theinvestment behavior as a bridge to explore how the overconfidence companyexecutives’ diviation in the investment decision-making process,and how thediviation might affect the value of the company’s maximization process; especiallyafter the outbreak of the financial crisis, the company’s decision-making backgroundhas changed largely,the market information vagaries dramaticly, people exhibit evenoverconfidence when be face with the predictabile problems and complexdecision-making, the change of environment will inevitably impact the behavioral characteristics of the executives, this impact will appear in the executives of theinvestment decision-making, and finally affect the company’s performance. The paperresearch on the background of the impact of the financial crisis on China’s realeconomy, in order to investigate the impact of managers’overconfidence on theperformance of the company.This paper selected the financial data from the2006to2011as the study sample,the financial data take from the listed companies in Shanghai and Shenzhen,and thesample is divided into2006-2008and2009-2011two groups to explore changes inthe economic background deviation caused by the acts of executives. impact, take thetwo sample back to the regression model in order to investigated in two intervalsmanagerial overconfidence how to effect the company’s investment,take theinvestment as a bridge to inspect how the managers’ overconfidence will affect theperformance of company In two stages.And examined the investment is themediating variables between the manager overconfidence and the performance ofcompany.The results of this study are as follows:(1) Human will overconfident to theaccuracy of their ability of grasp the information, the managers of listed companiesbecause of the "Better than Average",the optimistic tendency, to underestimate thenegative factors in the environment systematically, especially be face with theextremely difficulties,the overconfidence psychological problems are particularlyserious.After the financial crisis eroded our real economy,the overconfidence ofmanagers behavior became increased when compared with the states before thefinancial crisis.(2)The managerial overconfidence with the company’s investmentspending is positively correlated,be tackle with the financial crisis, the state hasadopted many positive Measures in order to revive the economy, the overconfidentcompany managers did not take the conservative financial policy, after the financialcrisis their companies take even more investment spending and over-confidentexecutive of its investment spending.(3) In the two period, the managers’overconfidence will negativly affact the performance of conpany.And at the period of financial crisis, managerial overconfidence take greater negative influence on firmperformance.(3) the companys’ investment is negatively related to the company’sperformance, The level of investment is the mediating variables between theoverconfidence and firm performance.