The Influence Of Manager Overconfidence On Enterprise Capital Allocation

For the past few years,increasingly scholars focus their research on enterprise capital allocation.Since the enterprise subject is usually defined as objective rationality,scholars are usually committed to improving and analyzing the theoretical system of enterprise capital allocation.Driven by the rapid progress of social development,scholars have found some inappropriate aspects in the theoretical analysis of financial market,such as the application of the word rationality,This also causes many subjective judgments to be affected by many factors.Not only that,but also psychological factors to a certain extent,resulting in irrational behavior.In enterprises,managers,as the core of enterprise investment decision-making,play a major role in the development direction,investment and financing decision-making and the choice of capital allocation.Different managers have different characteristics.Therefore,although they have a special understanding of the company and rich experience,they may have irrational behavior in the actual courses of decision-making.Via the analysis of the causes of this kind of behavior,it is highly possible the overconfidence of the management itself.But now,as far as the research itself is concerned,from the perspective of rationality alone,the evaluation of managers may be too one-sided.Through the analysis of previous scholars’ research on enterprise management,this paper finally comes to the conclusion that enterprises are likely to be affected by managers’overconfidence in the process of capital allocation.After consulting a large number of data,it is valuable to study whether managers’ overconfidence will affect enterprise capital allocation,Therefore,this paper takes listed enterprises as the research object,and takes the degree of marketization,ownership concentration,industry nature and property right nature as heterogeneity;Taking equity incentives,financing constraints and risk-taking as intermediary variables,this paper explores the mechanism of the affects of managers’ excessive confidence on enterprise capital allocation.The research shows that for those overconfident executives,they will be affected when implementing the capital allocation adjustment decision.The overconfident management will increase the debt financing of the enterprise,which will make the enterprise invest in some inefficient projects,which will have an impact on the capital allocation of the enterprise.Analyzing from the perspective of heterogeneity,there are significant differences in the capital allocation speed of enterprises with different property rights:although state-controlled companies have resource advantages,private companies are more market-oriented in all aspects.Therefore,the nature of property rights has a positive regulatory effect on managers’ self-confidence and capital allocation;from the perspective of equity concentration,equity concentration magnifies the power of management and positively regulates the relationship between manager’s overconfidence and corporate capital allocation.;The nature of the industry and the degree of marketization also positively regulate the relationship between overconfidence and corporate capital allocation.From the perspective of intermediary effects,managers’ overconfidence influences the capital allocation of enterprises through risk-taking,financing constraints,and equity incentives.They have the following characteristics:managers’ overconfidence magnifies their willingness to take risks,and managers are more willing to provide equity incentives.The smaller the impact of financing constraints,the more companies are more willing to allocate capital.