Research On Financial Distress Of ZH Company From The Perspective Of Overconfidence Of Managers

In recent years,there are more and more researches on behavioral finance,which focuses on the influence of psychology on the behavior of managers,so as to expand the research on psychological bias and financial decisions.In traditional economic theory,managers are set to be perfectly rational and make decisions with the goal of maximizing the value of the firm.However,in reality,the behavior of managers is not completely rational,and overconfidence,as the most common psychological deviation of managers,may lead to the abnormality of the existing traditional theories and models.The High Echelon theory also points out that certain characteristics of managers will affect their decision-making behavior and thus affect the overall development of the company.However,in the daily operation of enterprises,managers often need to make decisions,and there are countless enterprises that are in financial difficulties because of the wrong decisions.The enterprise is constantly growing or losing money in the decision-making process.Will the overconfident managers reflect different decision-making tendencies,which will lead the enterprise into financial difficulties? Based on the above problems,this paper takes the overconfidence of managers as the starting point to study the causes of financial distress of enterprises.In this paper,using literature research and case analysis,first of all,literature has carried on the earnest study of relevant theory,construct the mechanism analysis framework of "feature-behavior-result",on this basis,ZH company is selected as the case study object.The case study is based on the annual report of 2010-2017 and the semi-annual report of 2018 and other relevant materials,and analyzes the financial distress of ZH company through horizontal and vertical comparison and relevant indicators.Secondly,based on the actual situation of the managers of ZH company,WYH’s overconfidence was measured by the self-profit attribution method,profit forecast deviation method and M&A behavior method,and the causes of financial distress of ZH company were analyzed from the two paths of financing decision and investment decision.After analysis this article found that useful company "actual control" phenomenon is serious,the manager WYH overconfidence is useful financially troubled company cannot ignore a important reason,their financing decisions,investment decisions are influenced by personal overconfidence,and lead to useful companies insolvency problems such as imbalance,cash flow and profitability to reduce,the final was in financial trouble even delisted.It is hoped that the analysis of this paper can provide warning and reference for other companies in financial distress or about to get into financial distress in China.