Managerial Overconfidence And Enterprise Innovation Investment

Against the background of the Sino-US trade war and the initiation of the “Made in China 2025” plan in China,the innovation capability has increasingly become a key factor in showing the overall competitiveness of the enterprise.Innovation capability cannot be separated from the enterprise innovation investment.While innovation investment not only requires the decision-making from the managers,but also requires the cooperation and support from stakeholders.A variety of scholars have proved,from the perspective of bounded rationality,that overconfident managers have higher risk-bearing level,which will promote the enterprise innovation investment.At the same time,some scholars have found that the overconfident managers will under-invest in low cash flow levels,so the influence of the overconfident managers on enterprise innovation investment is still questionable and doubtful.While,on the other hand,the controlling shareholder,as the controller and stakeholder of the enterprise,may influence the management and investment decisions made by the managers through the Board of Directors.The controlling shareholder's share pledge makes the controlling shareholder obtain external financing and relatively sufficient cash flow on the premise of maintaining the control right over the company,but at the same time,the risk in transferring the control right is intensified,which has reduced the risk-bearing level for the enterprise.So how will the controlling shareholder's share pledge affect innovation enthusiasm of the overconfident managers?With taken the above backgrounds into consideration,this paper starts from the principal-agent theory,the behavioral finance theory and the innovation theory,and in view of the managerial overconfidence from an “irrational perspective”,combines with the relevant previous researches on controlling shareholders' share pledge in corporate governance,obtains China's A-share listed companies from 2011 to 2017 as a research sample,uses OLS regression analysis method to study the influence of managerial overconfidence and controlling shareholders' share pledge on enterprise innovation investment,and explore whether there are any differences for the moderating effect of controlling shareholders' pledge on managerial overconfidence and enterprise innovation investment under different corporate governance environments and state ownership.Thus,the main conclusions drawn from this paper are listed as follows: First,when maintaining other conditions as the same,managerial overconfidence is conducive to the improvement over enterprise innovation investment.Second,the controlling shareholder's share pledge will negatively adjust the positive correlation between managerial overconfidence and enterprise innovation investment.Third,duality will intensify the negative moderating effect of the controlling shareholders' share pledge on the relationship between managerial overconfidence and enterprise innovation investment.Fourth,compared with the state-owned enterprises,the negative adjustment of the controlling shareholder's share pledge between the manager's overconfidence and innovation investment is more significant in non-state-owned enterprises.The research results not only provide empirical evidence for enterprises to an establish effective corporate governance mechanism,but also provide relevant regulations for the regulatory agencies to formulate relevant laws and regulations in order to supervise the share pledge behavior.