Overconfidence, Diversification And Firm Performance

Agriculture is the primary industry, agricultural enterprises is the cells of agricultural economy, the agricultural listed companies is the advanced behalf of organizational form of agricultural productivity in China today. Being burdened with important task,however, listed agricultural companies are engaged in diversified operation and back farming operation,because of the weakness of the agriculture and profit-driven characters of the capital. The efficiency of the diversification has become a big problem to the academic and practice.The tradition research on corporate diversification follows with rational economic man hypothesis, it failed to consider the impact of the participate 's psychological factors on the business operations, and it cannot explain the reality of many phenomena arising in business. Therefore, it is necessary to introduce the psychological research, considering the psychological factors of business managers on business operations and decision-making behavior. The purpose of this paper is to study the existence of of agricultural listed companies managers over-confidence psychological, and whether this kind of psychological impact the diversification of agricultural listed companies, whether diversification affect business performance, whether business performance affect over-confidence. In this paper, the normative and empirical research methods combined. First, analysising the existence of over-confidence from a theoretical view, describing the relevant theory of the diversification, and then collecting 30 agricultural listed companies data for empirical research, including descriptive statistics and explanatory research. Specific methods including descriptive statistics, Spearman rank correlation coefficient and the K-S test method.Agricultural listed companies in the article is the agriculture, forestry, animal husbandry and fisheries of the A-share listed in Shanghai and shenzhen,which was defined in Guidelines on Industrial Classification of Listed Companies by SEC.this paper will examine the correlation relationship among manager overconfidence, diversification and firm performance levels.The degree of managers over-confidence are measured as change in the proportion of managers share-holding, and it can be caculated with the general manager, senior executives and directors plus senior executives, selecting the business unit number, Herfindahl index and the entropy index as a measure of corporate diversification variables. Financial performance can be measured by ROE,ROA,operating margin, gross margin, and market performance can be measured by Tobin's Q, P/B and P/E. Research shows that Chinese agricultural listed companies are characterd with less than normal number, small scale, uneven geographical distribution, the lower overall profitability, it departures from the foundation of the national economy of agriculture significantly. The agricultural listed companies exists the tend to diversify more serious, and this tendency to further expand. The mean of managers overconfidence are about and most of greater than 1, indicating that there is no obvious overconfidence tendency for the managers. Managers Confidence are affected by individual characteristics and organizational characteristics. Empirical studies showes that the managers'age have significantly correlation with level of overconfidence in the level 1%,and it is negative correlation, the correlation between over-confidence and gender factor is low. Degree of education and the year employed in the current position have no significant correlation. Managers over-confidence have no significant correlation with corporate assets, the proportion of tradable shares, the proportion of state-owned shares, the proportion of the largest shareholder, asset-liability ratio, number of directors, two state of the general manager/chairman of the board in staff(Dual) and The proportion of independent directors. Revenue growth of agricultural listed companies fluctuate considerably,with high risk business. The Dual has a significantly correlation with the number of business units, Herfindahl index and the entropy index. The natural logarithm of the Income subsidy and the number of business units are significantly correlated in the 5% level of significance, other factors did not reach significant levels.Manager's degree of confidence havenot not statistically significant correlation with the diversification degree, it did not show statistically significant correlation between diversification degree and firm performance variables, it also did not show statistically significant correlation between corporate performance and over-confidence variable.Finally, it give out the main conclusions of this paper, the recommendations to the management of agricultural listed companies and the corresponding policies, it also points out the limitations of this study and future research directions...