The Impact Of CEO Confidence On Corporate Cash Holdings

The existing literature shows that,based on the trade off theory and agency theory,enterprises accumulate cash assets mainly for transaction motive,prevention motive and agency motive.When the prevention motivation is too high,it will also lead to agency problems,because too much cash holding provides managers with too much decision-making power.Meanwhile,the change of economic conditions and business environment of enterprises will also affect the transaction motivation and prevention motivation,thus affecting the cash holding.Both theories to explain corporate cash holdings are based on the use of corporate cash without considering the psychological behavior of the decision-makers who decide how to use the cash.In this study,we believe that CEO’s attitude to venture capital will also affect the company’s cash holdings.We explore the motivation of cash holdings through the level of cash holdings and cash value.CEO with high confidence tend to overestimate investment returns.Due to agency problems,they may have different interests with external investors,so they avoid external equity financing and prefer to make more investments with sufficient internal funds.At the same time,managers with higher self-confidence will be more enthusiastic about risky and challenging projects,because people are more likely to become overconfident when dealing with challenging tasks,and companies will have higher return volatility,greater R&D expenditure and more opportunities for innovation.Based on the theories of psychology and behavioral finance,this paper studies the correlation between CEO self-trust and cash holdings and cash value of film enterprises from the perspective of CEO irrational behavior,as well as the impact of external investment environment and internal cash holdings motivation on this correlation.This paper samples financial data of Chinese listed non-financial A-share companies from 2009 to 2020 and personal characteristics of managers,uses the personal characteristic tendency score of managers as A method to measure the self-trust of CEO,and uses five indicators,such as gender,age,educational background,salary and whether the two jobs are integrated to measure the self-trust of CEO.CSMAR database was used to collect data,and SAS and Stata16 software regression analysis method was used to verify the hypothesis.The results show that CEO self-trust has a significant positive correlation with cash holdings when other factors are controlled.Follow-up tests show that the positive correlation between CEO self-trust and cash holding level is more significant for enterprises in high-tech industries,and also more significant for enterprises with higher transaction motivation and prevention motivation.In addition,in the debate on the value of cash,it has been found that greater CEO confidence and higher cash reserves create added value for the company,thereby increasing the real value of their cash reserves.And the effect was even stronger in high-tech industries,further confirming that companies that hire confident CEO in innovative industries,where competition is fiercer,gain more value.The conclusion of this paper expands the research results of CEO irrational behavior characteristics and corporate cash decision-making,explains the relationship between the cash value,and provides some reference value for cash policy management of listed companies.