The Research On Relationship Between Managerial Overconfidence And Corporation’s Strategy Choice

This paper, from the cognition to cognitive biases, and then to managers excessiveself-confidence, and finally to the strategic choice, according to this logic reasoning gotmanagers spend degrees to the influence of confidence strategic choice basis.Manager’s overconfidence is across the economics, management and psychologicalresearch topic. Scholars from "rational economic man" hypothesis as the foundation,gradually develop to the economic man hypothesis of irrational. Gervais, Heaton and Odeanto set up two paragraphs capital budget model managers overvalue him decision-making andunderestimate the psychological characteristics of market risk defined as manager’soverconfidence. No matter the high estimate future earnings or low estimate investment risk,it will finally make the future development and strategy decision-making. Diversificationstrategy is specialized business and corresponding management strategy, the implementationmultiplication strategy the company and implementation of the strategy of professionalcompanies have different properties. The company decided to implement diversifiedmanagement, means the company will readjust and its resources allocation for humanresources reorientation. Diversified management strategy does not exist alone, it and otherstrategic have close relations, and it is a kind of make the company changes of strategy.This study to managers overconfidence and company strategic choice analysis, justifiesthis assumption. We mainly from behavioral finance perspective focused on the research ofmanagement personnel overconfidence on diversification impact of decisions, and found thatoverconfidence can be a very good explain the diversity of enterprise phenomenon. Throughto the Shenzhen A shares of manufacturing industry, the study found the overconfidencedegree of preference managers’ diversified high strategy. Through literature study found thatthe higher the degree of diversified company performance is lower, so overconfidence on thedevelopment of the company is unfavorable.Through the study, the author proved overconfidence on company strategy managementtype choice of the relationship. In a degree of diversified company, overconfidence managerswill prefer a high degree of diversified company strategy.