Research On Relationships Among Managers’ Overconfidence, Accounting Conservatism And Investment Efficiency

The research on inefficient investment behavior has always been the focus of the academia. The managers were fully regarded as "economic man" in the traditional theory, while research on psychology and behavioral finance shows that managers’ decision are not absolutely rational, but exhibit limited rationality, which leads to some important enterprises decisions deviating from the target of corporate value maximization. While managers’overconfidence is one of the important factors that affect such decision-making behavior. In China, the market economy is still developing and not perfect, the influence of managers’overconfidence on enterprises investment behavior may be more obvious. From the perspective of investor protection, it is necessary to explore whether there is any corresponding corporate governance mechanism that can effectively restrict the enterprise value damage caused by managers’overconfidence.As an important financial reporting attributes and an effective corporate governance mechanism, accounting conservatism can decrease the degree of information asymmetry and reduce the agency cost. However, few scholars pay attention to the governance effect of accounting conservatism on managers’irrational decision-making behavior. Based on such background, the listed companies in A-share market of Shanghai and Shenzhen Stock Exchange from 2009 to 2014 are selected as the research object and are distinguished between the nature of property rights to explore the effects of managers overconfidence on corporate investment efficiency and conservatism policy play a governance role on managers overconfidence investment decision.The research results show that there is a positive association between manager overconfidence and over-investment and the situation is much severer in state-owned enterprise than in non-state-owned enterprises; conservatism policy can help to improve the efficiency of investment and the effect is weaker in state-owned enterprise than in non-state-owned enterprises. Further study shows that the more conservative policy is, the weaker the positive association between manager overconfidence and over-investment is. Compared with non-state-owned enterprises, conservatism in the state-owned enterprise has weaker impacts on manager overconfidence and over-investment.