Empirical Study On The Impact Of Managers' Overconfidence On Corporate Value

With the development of behavioral finance, people began to realize that the Hypothesis of rational managers is greatly limited. Managers tend to make irrational behaviors that affect the enterprise value which is the ultimate goal of financial management. At present, compared with the studies on enterprise investment, mergers and acquisitions and financing strategies and other aspects of research, few scholars pay attention to the impact of managers'overconfidence on the enterprise value.So, the paper will use standardized methods and empirical analysis to study the correlation between managers'overconfidence and enterprise value. During normative analysis, this paper reviews the domestic and foreign study on managers' overconfidence and enterprise value. Then, combining with the simple model, managers'overconfidence theory, orderly financing theory and other related theory, the paper discussed the influence mechanism through enterprise investment, mergers and acquisitions and financing. When it comes to empirical test, the paper first measures managers' overconfidence using a pioneering ways which is called "performance prediction deviation method". Then, the paper verifies the conclusion of theoretical analysis through descriptive statistical analysis, correlation analysis, multiple regression analysis and other statistical methods such as robustness tests.Through the normative research and the empirical test, this paper's conclusions are as follows:(1) Behavioral finance theory, particularly the managers'overconfidence theory is verified in our special background of the capital markets. To some extent, managers' overconfidence theory thoroughly explains some of managers'non-rational behavior.(2) Primarily through channels such as investment, financing, mergers and acquisitions, the managers'overconfidence impacts on corporate value. (3) There is a significant negative correlation between managers'overconfidence and enterprise value. In other words, managers'overconfidence reduces corporate value though excessive investment, underinvestment, debt financing, and frequent mergers and acquisitions.(4) According to different levels of corporate governance, managers' overconfidence effects on corporate value differently. There is a stronger negative relationship between managers'overconfidence and corporate value in the enterprises with high level of corporate governance.