Managerial Overconfidenc And Firm Value

Academic circles have long focused on firm value research,it comprehensively considers the risk-taking level,profit ability and development ability of the enterprise,which has become an important standard of success for enterprise.Based on the rational man hypothesis,most studies has focused on the affecting factors of firm value from the financial tactics and capital structure angles,but ignoring the important role of managers irrational behavior to enterprise value.With the development of behavioral finance theory,the academia began to combine the manager’s overconfidence psychology and enterprise financial decision-making,further studied on its influence on the firm value.The managers who have overconfidence have cognitive biases on company risk and business activities,which can lead to overinvesting,over-debt and frequent M&As for enterprises.And as the highest authority in the company,the board can supervise and correct management of self-interest behavior,which effectively restrained the managers’overconfidence tendency.In consequence,this thesis choose firm value as research center,exploring the relationship between managerial overconfidence and firm value under different property rights,,and setting board governance as regulating variable.This thesis organized as follows:The first part is an introduction.On this basis,this part shows the research framework,research method and innovative points of this research.The second part is a summary of domestic and foreign research literature.This part summarizes domestic and foreign research literature on firm value,the relationship between managerial overconfidence and board governance.The literature review shows the reason why chooses ’board governance as regulate variable and lay the groundwork for the hypothesis.The third part is theoretical basis and research hypothesis.This part analysis the possible link between managers’ overconfidence,board governance and firm value and put forward the research hypothesis.The fourth part designs the empirical study.This part explains explained variables,control variables and regulating variables in detail,and constructs relevant model.The fifth part is the empirical results and analyses.This part shows the results of descriptive statistical analysis,the tests of the reliability,validity of the variables in the model and robust test with the help of STATA.The sixth part is the summary and prospect.This part proposes the conclusion of this research and relevant management suggestions.Finally,this part points out the limitations of the research and research direction in the future.Based on the sample period of 2011-2015,this paper selects A stock listed company in Shanghai and Shenzhen as data sample,and the conclusions turn out to be:(1)Managerial overconfidence and firm value were negatively correlated relationship;(2)Different aspects of board governance have different effects on the relationship of managerial overconfidence and firm value.The separation of board of directors and general manager,the improvement of independent directors proportion and the increase of board meeting times can weaken the positive correlation between managerial overconfidence and firm value,while the increasing size of board can’t play an inhibitory effect on the relationship.(3)Managerial overconfidence has different influence on firm value under different property rights firms.Compared with the state-owned listed companies,managers’ overconfidence in non-state-owned listed companies has a stronger influence on firm value.In addition,this thesis make a robustness test to the model using alternative measures managers’ overconfidence and firm value,the conclusion of the paper is generally verified.