An Empirical Study On The Relationship Between Managerial Overconfidence And Corporate Over Investment Behavior

Investment is an important content of corporate financial activities. In the traditional financialtheory and economics theory, indicates a common assumption, namely the enterprise managers arerational. But in the real economic life, many phenomena can not be explained by the classical modeland the theory of finance. So, scholars have questioned the traditional assumption of rationaleconomic man, and founded the behavioral corporate finance. In this theory, managerialoverconfidence is one of the factors causing the corporate investment distortions. Therefore, thispaper tries to from the perspective of behavioral corporate finance theory, to study whether listingCorporation manager in our country has the tendency towards excessive self-confidence? In China’slisting Corporation, managerial overconfidence will have an impact on the investment decision ofthe company? Managerial overconfidence will increase the company’s cash flow sensitivity?Through the analysis of investment behavior over Listing Corporation, to further explore the causesand proposed corresponding governance mechanism. Whether it is the beneficial supplement andperfection of existing behavioral corporate finance theory, or to improve the regulatory efficiency oflisting Corporation and promote the healthy development of China’s capital market, has theextremely vital significance.Combining normative research and empirical test is the method used in this paper. Based onthe related literature of scholars at home and abroad has been reviewed and commented, select thelisting Corporation managers in the company that the rate of return on net assets decline, in additionto performance shares and dividends and other reasons still choose the stock holdings, as a measureof managerial overconfidence standard. To construct the basic theory of investmentdecision-making behavior of a framework based on Managerial Overconfidence hypothesis. Afterselecting the2009--2012shares in Shanghai and Shenzhen A industry categories of listingCorporation as a research sample, empirical test of the effect of Managerial Overconfidence oninvestment decision-making behaviors of the company. Through theoretical analysis and empiricalanalysis, draw the following conclusion: First, is positively related to managerial overconfidenceand corporate investment expenditure. Managers are often on their own abilities or project proceedsgenerated overestimated, at the same time to underestimate the risk of the project, resulting inexcessive investment. Second, when the enterprise cash flow is sufficient, overconfidence managersare more likely to make investment decisions, bring the over investment behavior. It also shows that managerial overconfidence on investment cash flow sensitivity.