Constraint Model Study Of Business Investment Risk Based On Manager's Irrational Features

Three decades of reform and opening up of China's rapid economic development has made remarkable achievements, which greatly facilitate and improve China's market economy, enable us to establish a relative perfect modern economic system, and lay a solid foundation for the further development of the economy. China, recognized as the world's "big manufacturing country," has the world's highest foreign exchange reserves and face the current development trend of global economic integration. "Absorbing", "digestion" and then "going out" are the inevitable choice, so large-scale international investment is also inevitable.As the most basic economic activities in modern society, at any time, the investment might face the risk of failure. A successful investment is to create wealth for investors and our society, while the failure of investment is a huge waste of resources. Therefore, how to realize the asset value-added investment objectives, effective control and reduce investment risks, and avoid unnecessary investment losses, is a very urgent and realistic issue, which is very important for China's "going out" national strategy. But in current China, China's economy generally lack of sober and objective understanding of investment risk, and enterprises and entrepreneurs have generally grown after the eighties of the twentieth century, and they are just bystanders or witnesses to the Mexican economic crisis, the Southeast Asian financial crisis, the U.S. subprime mortgage crisis and other regional economic crisis. They generally do not experience the big world brutal baptism of economic crisis, let alone have the unforgettable sense of crisis of investment risk. From the manager non-fully rational point of view, considering both rational and irrational factors influencing the business investment risk, we focusing on the impact and relationship between irrational factors such as overconfidence, risk preferences and investment risk in order to provide policy recommendations for constraining the non-rational factors and lower investment risk.The thesis is divided into six chapters:The first chapter is an introduction, describing the background, significance, research content, methods and technical routes of the topics; The second chapter is the relevant literature review and theoretical preparation; The third chapter analyze business investment assessment model under the traditional economics rational hypothesis; The fourth chapter analyze the non-rational behavior and perform empirical research on the relationship between managers overconfidence and investment risk and the relationship of the manager risk preference and the enterprise investment risk; Chapter V establish corporate investment risk constraints model considering the managers non-fully rational, analysis the results of the empirical research and provide policy recommendations; The sixth chapter is the conclusions and discussions.This paper got the following main results:(1) Constructing evaluation system of enterprise investment risk based on the assumptions of rational economic man.Based on the analysis of the process of corporate investment activities, and accounting from the two aspects of the macro (system) and micro (non-system), we select the factors of nature, politic, economic, industry, technology, marketing, finance, and management. We established business investment risk evaluation system including the 23 indicators. In accordance with the idea of combining objective and subjective, the thesis used the G1 method and variation coefficient weights method, implement the combination of empowerment, and build the evaluation model of investment risk based on the dynamic combination of empowerment.(2) Manager overconfidence is the Granger cause of the business investment risk.In order to identify the relationship of manager overconfidence and the business investment risk, we selected MOC and EIR as the proxy variables for manager overconfidence and corporate investment risk. After establishing the Granger causality model, we took the listed companies 2002-2009 years of continuous data as the samples, and performed the unit root test of the panel data and Granger causality test. The results showed that manager overconfidence is the Granger cause of the business investment risk and the corporate risk according to manager overconfidence significantly shown in the second year of operation lagging behind the manager overconfidence; we also found that business investment risk is not the Granger cause of manager overconfidence.(3) Manager risk preference is the Granger cause of enterprise investment risk.Firstly, we established a regression model and took the manager's risk preference as the dependent variable. The independent variables included the lagged first-order variable of manager risk preferences, gender, age, background, company tenure, personal wealth, and other indicators. Then we took the senior managers of Chinese listed companies in 2000-2009 as samples and perform the sample regression. We classified three sample terms including high authority sample, intermediate authority sample, and low-level authority sample, and completed regression and measured risk preferences of managers. On this basis, we built the Granger causality test model of manager risk preferences and corporate investment risk, and performed empirical research.The results showed that the manager risk preference is the Granger cause of investment risk, while investment risk is not the Granger cause of manager risk preference. (4) Construction constraints model of corporate investment risk considering non-fully rational.Based on the results of evaluation of enterprise risk and Granger causality test, the thesis combined the rational factors and irrational factors of investment risk, built the evaluation model of investment risk, and performed the empirical study of regression analysis. Focusing on the perspective of non-rational factors, we analyzed the causes and methods to reduce the investment risk. The results showed that manager overconfidence, manager risk preference, and the cross-correlated variables between the two variables are all positive correlation with the overall business risk.