Research On The Influence Of Managers’ Overconfidence On Inefficient Investment

In the real economic activities,companies generally have inefficient investment phenomenon,which affects their survival and development.Behavioural finance believes that the psychological characteristics of overconfidence of managers are an important reason for companies to make inefficient investments,and how to curb the inefficient investments caused by overconfidence of managers has become a hot issue of concern in academic and practical circles.With the acceleration of globalisation,chain director networks among modern companies are common and becoming increasingly sophisticated.Companies can access and control various types of social capital and information resources through their embedded interlocking director networks.As the access to various superior resources in the network has structural effects,companies in different network centres and structural holes have different abilities to access social resources,which also have different impacts on the effectiveness of corporate governance and decision-making behaviour.Previous research findings provide evidence on the impact of the strength of social network relationships or structural characteristics on the efficiency of corporate investment.However,there is less literature on how network location characteristics of chain directors moderate managerial overconfidence and its decision-making consequences by using network location characteristics as a moderating variable and introducing irrational behaviour of managers.Therefore,using social network analysis(SNA),the article selects Chinese non-financial listed companies in Shanghai and Shenzhen A-shares from 2016-2020 as the research object to empirically test the impact of chain director network location characteristics on the relationship between managerial overconfidence and inefficient investment,and to analyse the mechanism by which chain director networks affect internal corporate governance.The findings indicate that:(1)there is a positive relationship between managerial overconfidence and inefficient investment in the firm;(2)chain director networks have a moderating effect between the above two,i.e.network centrality weakens the positive relationship between managerial overconfidence and inefficient investment,while network structure holes exacerbate the positive relationship between managerial overconfidence and inefficient investment;(3)the greater the number of board meetings,the chain director network centrality is more effective in suppressing the inefficient investment phenomenon caused by managerial overconfidence.The findings of the study can provide a reference for listed companies to improve their internal governance through the use of chain director networks,and are also valuable for expanding the study of social network theory in relation to managers’ irrational behaviour.