Executive Overconfidence,Financial Flexiblility,and Corporate Value

Research in the field of traditional financial theory is based on the assumption of a “reasonable economic man”.He believes that people are completely rational economic people,and their pursuit is to maximize utility.Then study the relationship between the decisions made by managers and the value of the company.However,with the emergence of many visions in the financial market,the "rational person" hypothesis has become increasingly prominent.In the process of gradually relaxing the rational person hypothesis,behavioral finance theory came into being.Scholars gradually realized that managers are not completely rational.Managers often make a lot of irrational behaviors when making decisions,affecting the maximum value of the company.Realization.Different from the traditional financial theory,the behavioral finance theory takes the psychological factors of managers into consideration,and finds out that when managers make decisions,they generally have the psychology of overconfidence,herding and frame dependence.Among them,overconfidence is the most typical feature exhibited by managers.Some scholars believe that even if managers are loyal to shareholders,the overconfidence of managers tends to lead companies to invest excessively,which makes it easier for companies to assume excessively high levels of debt to become financially distressed,thereby seriously damaging the value of the company and even making the company imperfect.Bankruptcy.Some scholars believe that managers with overconfidence can pay more attention to their own satisfaction in their work.Therefore,they will work harder and invest more energy in managing the company,thus reducing the cost of agency and agency and improving the value of the company.What is the relationship between executive overconfidence and corporate value? At present,China's economy is undergoing an important period of transition and development.The accelerating globalization process,the rapid development of science and technology,and the continuous changes in government policies have caused the business environment facing enterprises to be filled with more and more ambiguities and uncertainties.It is very difficult for companies to survive and seek development,and they are constantly looking for ways to maximize their value.Corporate value is a comprehensive indicator that considers the profitability,development ability and risk status of an enterprise and is affected by many factors.One of the best ways for companies to maximize the value of their businesses is to choose the right and effective financial decisions.Therefore,how to rationally allocate corporate financial resources and formulate reasonable and effective financial decisions under the new economic normality to cope with the uncertainty of the economic environment has become an issue that must be considered by enterprises.The new economic normal requires that companies must be able to seize opportunities and meet effective and sufficient resources and elements in order to achieve value added when they encounter valuable opportunities.The financial flexibility of enterprise reserves can enable enterprises to confidently respond to the uncertainty of internal and external market environment,receive timely financial support,grasp favorable investment opportunities,and affect corporate value.Therefore,it is particularly important to study the influence of financial flexibility on corporate value.At present,scholars at home and abroad are actively concerned about the relationship between executives' overconfidence and corporate value and the relationship between financial flexibility and corporate value.However,the discussion between financial flexibility,overconfidence of executives,and corporate value is relatively less.In fact,most companies in our country are subject to constraints such as financial constraints,and executives' overconfidence can easily lead to overinvestment and make companies fall into financial difficulties.Financial flexibility can help executives relieve financial pressures and reduce business risks in the course of business operations.How does financial flexibility affect the impact of executive overconfidence on corporate value? The article will discuss this issue in depth.Based on the data of listed companies in the Shanghai and Shenzhen A-Shares manufacturing industry from 2014 to 2016,this paper conducts empirical research by constructing a multiple regression model.The first is to study the relationship between executive overconfidence and corporate value of listed companies in the manufacturing industry.The results show that the executives' self-confidence level Will positively affect corporate value.Secondly,the relationship between financial flexibility and corporate value of listed companies in the manufacturing industry is studied.The results show that the higher the level of financial flexibility,the higher the value of the company.There is a positive correlation between the two.Finally,the study of how financial flexibility of listed companies in the manufacturing sector affects the impact of executive overconfidence on corporate value shows that high financial flexibility will enhance the positive impact of executive overconfidence on firm value,that is,executives' overconfidence on corporate value.The promotion effect is strengthened when the financial flexibility is large.This article applies psychology perspective and behavioral finance theory to corporate financial decision-making,enriches and improves behavioral finance and corporate value research,and provides empirical support for the selection of financial flexibility of listed companies in the manufacturing industry and the appointment of senior executives.