Overconfidence,Executive Compensation And Corporate Risk-taking

Risk-taking reflects decision-maker's risk preference,which can collect capital for shareholders and develop enterprise.Under the modern management system,ownership and managerial authority is separated.Corporate executive decides the enterprise strategy,which decides the operating efficiency of enterprises,so it is very important for the enterprise.However the managers are likely tend to make decisions for themselves instead of shareholders,which makes enterprise miss developing opportunity.How to make the managers and shareholders are converged,and to make the enterprise managers to raise risk-taking level of enterprises,are urgent and essential to solve these management problems.Through reading and analysis of the existing literature,this reality management problem has not been effective solved.Especially for small and medium-sized enterprises that are on small and medium-sized board and GEM in our country,their risk-taking research is lack.This study is based on the above requirements,and the defects of existing research,going on from two breakthrough points: managers' inner psychological characteristics like manager's overconfidence and external incentive like executive compensation.In this paper,following "ask questions-analysis problem-problem solving" steps,we go on this study.Select panel data between 2010 and 2013 from small and medium-sized board and GEM as data sources.Based on previous study,we use relative compensation and the top-three executive compensation as proxy variables of managers' overconfidence and executive compensation respectively.Firm size,age,enterprise growth and asset-liability ratio and equity concentration areas control variables.And build econometric model,from the descriptive statistics,Pearson correlation test,and fixed effects regression analysis for model validation.In order to guarantee the stability of the results,use ROE volatility instead of ROA volatility of three consecutive years to measure risk-taking.From robustness analysis,we get conclusions in line with the front.Through the above steps,we get the following conclusion: we found that managers overconfidence has significant difference on enterprise risk-taking level for small and medium-sized board and GEM respectively;executive compensation incentive suits these companies on the two the capital market,which can improve the enterprise risk-taking level.In addition,Firm size,age,enterprise growth and asset-liability ratio and equity concentration also affect enterprise risk-taking level.For enterprises that are from small and medium-sized board can rise enterprise risk-taking level by improving the enterprise growth and asset-liability ratio,or by reducing the proportion of equity concentration and investing other fields.For enterprises that are from GEM,due to the good growth,enterprise can choose to improve the asset-liability ratio,equity concentration or invest different fields to improve the level of enterprise risk-taking level.