Research On The Effect Of Managerial Overconfidence From Listed Companies On Capital Structure

Corporate capital structure has been the hotspot of scholars. All of the capitalstructure theory, includes the traditional capital structure theory, the modern capitalstructure theory and the new capital structure theory are based on the assumption thatthe behavior person is rational. However, in real economy activities, not all the peopleare rational, they are not only affected by the external environment, but also impactedby their own emotional and psychological, resulting in people’s irrational behavior,which the behavioral finance is based on to research the corporate financial behavior.Based on the behavioral finance perspective, this article will explore whether themanagers’ overconfidence effect the company capital’s structure or not.This article focuses on the theoretical and empirical two parts. In the part of theory,firstly, it introduces the theories of capital structure, and make a simple summaryabout the factors affecting the capital structure from the research literature; then basedon the existing research results, this article proves that managers do exist thepsychological deviation of overconfidence; finally, on the basis of the formerresearches reviewing the relative literature, to discuss the influence of managerialoverconfidence to capital structure. From the relevant literature, scholars generallybelieve that overconfident managers will affect the company’s capital structure, andcompared with the general managers, overconfidence managers prefer debt financing,in the choice of debt maturity structure, overconfident managers are also morepreferred short term debt financing.On the basis of theoretical analysis, this article puts forward three hypotheses, firstly,when the internal capital of the company is abundant, overconfident managers preferto use internal capital; secondly, when the company needs external financing,compared to the general managers, overconfident managers prefer debt financing;thirdly, compared to the general managers, overconfident managers prefer short-termdebt. In the part of experience, this article take the companies listed on Shanghai Ashare stock exchange and Shenzhen A share stock exchange from2008to2010assamples, with the help of SPSS software, the empirical results show that themanagerial overconfidence has significant positive relationship with the ratio between liabilities and assets and significant positive relationship with the ratio betweenshort-term liabilities and assets, it proves the three hypothesis.Combined theoretical and empirical research, the conclusion is that managerialoverconfidence do influences the company’s capital structure, it influences the ratio ofliabilities to assets and the debt maturity structure, this is more conducive todeepening the understanding of the theory of capital structure.