A Study On The Managerial Investment Decision Of China List Companies Based On The View Of The Overconfidence Theory

Overconfidence theory compensates for the defects of the classic financial theory in individual behavior analysis and research methods, and promotes the financial theory research to more realistic directions. The theory focuses on applying the basic tenets of psychology and economics to improve decision-making, draws extensively on the outcome of psychology, sociology, economics, in particular the decision-making behavior, and explains the cognitive deviation of investment behavior.By empirical study we found the following conclusions. First, overoptimistic managers are more impulsive in investments. In order to inhibit negative effects of blind investment of cash flow, we can reduce the cash flow which managers can own by debt. So it will reduce agent costs of cash flow. Second, according to analyzing the different market characteristics group, we can found that overoptimistic managers are not sure of increasing investment, but only in the possession of sufficient cash flow. Third, based on the different financing constraint conditions, we found that there are not some relationships in sensitivity of cash flow investment of managers and strength or badness of financing constraint. Fourth, an efficient governance mechanism which can constrain could reduce bad effects of investment decisions. We can design more reasonable forms of business organizations to regulate them based on their characteristics by effective identification of managerial overconfidence. To avoid some effects of choosing different agent variables, we have the similar results by sound analysis.