Research On The Effect Of Managerial Overconfidence On Corporate Investment Efficiency

Investment efficiency not only determines the company ’ s future cash flow continues to grow or not,but also has an important impact on the company ’ s value.With the continuous advancement of China ’ s marketization process,companies in all walks of life have a high investment enthusiasm,which is easy to lead to inefficient investment problems.In recent years,scholars have tried to explore the reasons for inefficient investment in companies from different perspectives such as internal governance structure,free cash flow and corporate life cycle.However,the analysis of early scholars is based on the assumption of ’ rational man ’,that the company ’ s internal managers are rational when making decisions.However,according to psychology and research,the “ rational man ”under traditional economics is not “ rational ”.Managers will have the tendency of overconfidence due to irrational psychological characteristics,which will make managers blindly optimistic and underestimate risks when making decisions,thus affecting the investment efficiency of the company.In addition,as an important part of corporate ownership structure governance,equity checks and balances can supervise and restrict managers ’ behavior decisions,thus affecting the daily operation of the company.Therefore,it is of theoretical and practical significance to study the impact of managerial overconfidence on corporate investment efficiency,and whether equity checks and balances can play a role in the relationship between the two.Based on behavioral finance theory,this paper selects the relevant data of listed companies in Shanghai and Shenzhen A-share market from 2015 to 2019 as research samples,and uses multiple regression analysis to study the relationship between managerial overconfidence and overinvestment,managerial overconfidence and underinvestment,and empirically studies whether equity balance mechanism can play a certain role in the relationship between the two.The results show that :(1)Managers ’overconfidence will lead to excessive investment,but the emergence of overconfidence is conducive to reducing the degree of insufficient investment;(2)Equity balance mechanism can inhibit over-investment caused by managerial overconfidence,but it cannot play a significant role in the relationship between managerial overconfidence and underinvestment.Through the research of this paper,on the one hand,it can further enrich the research on inefficient investment from the perspective of behavioral finance to a certain extent,and broaden the research vision of the impact of managerial overconfidence on corporate inefficient investment.On the other hand,it can provide guidance for the company to improve investment efficiency and realize the rational allocation of resources.