Empirical Study Of The Effect Of Managerial Overconfidence On The Financing Decision Of Chinese Listed Companies

Since Modigliani and Miller proposed the famous MM theorem， the financingdecision-making is always the focus they pay attention on. There are many theories toexplain the financing behavior of the corporate，most of the m supposed that the managersand investors are the rational policy-maker who max the effectiveness. In recent years，with the development of the financing research of the corporate behavior，the westernscholars combined the behavior research of the corporate financing’s decision maker withthe basic assumptions and research methods of the behavioral finance，making thecorporate finance decision-making research completely and perfectly from the point ofsenior executives behavior characteristics. Manager’s irrational understanding especiallyoverconfidence and the research of the relationship between the decisions and thecorporate financing come into the view of scholars，and will become a new hotspot.However，from the background of china’s system，the research between manager’soverconfidence and the company financing decision is poor. Thus， this paper give up thehypothesis that managers are rational people， from the point of manager’s overconfidenceanalysis the influence on the company financing decision，in order to enrich the researchfindings of the manager’s overconfidence， and to provide useful references formanagement practice.This paper attempts to study the following issues：whether the managers of Chineselisted companies have overconfident psychological biases? whether managerialoverconfidence will affect the listed companies’financial decision?In this paper，we made a research review on impact of corporate finance decision withoverconfidence managers. Then from the view of behavioral finance，this paper takingthe companies listed on Shanghai A share stock exchange and Shenzhen A share stockexchange from2009to2011as samples（eliminate the company of the financial and realestate，asset-liability ratio greater than100%，as well as company with loss data），takesresearch on the effects of managerial overconfidence on listed companies’ leverage anddebt maturity structure by the change of mangers holding and the relative proportion ofexecutive pay. The empirical results shows： managerial overconfidence is one ofsignificant factors to companies’ leverage and debt maturity structure. We can draw aconclusion from above all that managers with high overconfidence degree overestimateyield rate and this kind of overestimation shall affect the finance judgment and it cause thatthe existing shareholders don’t want to share the future profits with fresh shareholders，sothese companies prefer debt finance to stock finance and it leads to high liability ratio. In the meanwhile，overconfidence managers overrate their manage ability and profit ability ofthe investment item，and they believe the yield rate is higher than the actual rate and thepayback period is shorter，so they incline to borrow more short-term debts.