A Study On How Managerial Overconfidence Impact Capital Structure In The Medium And Small Listing Companies

In the traditional finance theory, we assume that people are rational in the economic activity, we believed that people have sufficient capacity in the decision-making to benefit themselves. In the assumption, we assume that people will measure their costs and benefits, and then they will choose the best option for themselves. However, since the 1980th, the behavioral finance theory was developed, and it made a strong challenge to traditional finance theory. Many studies focus on the relationship between manager overconfidence and investment decisions, but recently they give more focus on the relationship between manager overconfidence and company's debt financing. In the theoretical studies they have made a preliminary conclusion, but there are some problems in the related empirical research. The mainly reason is that it is difficult to measure the manager over-confidence precisely. There are many studies abroad, but the domestic research is relatively rare. So in China, under the government-led developed stock markets background, do the listed company's management have overconfidence features? If they have, how the management overconfidence impact on the capital structure of listed companies? All these problems are worthy of further study.Based on the above analysis, This paper use empirical research method, collected relevant data from 2006 to 2009 of the medium and small companies listed on the Shenzhen stock exchange in China. Then we use Eviews6.0 for statistical analysis. Empirical analysis examined how the managerial overconfidence impact on capital structure and debt maturity, and finally got the following conclusions:(1) The company's capital structure is significantly impacted by the managerial overconfidence. Managerial overconfidence and the company's capital structure are positively correlated, with 10% level of significance, this indicates that companies with overconfident managers prefer debt financing.(2) The company's debt maturity structure is significantly impacted by the managerial overconfidence. Managerial overconfidence and the company's debt maturity structure are positively correlated, with 10% level of significance, this indicates that companies with overconfident managers have more short-term debt financing.