Research On The Effect Of Managerial Overconfidence, Corporate Governance On Investment Behavior

Investment behavior has been the focus of theoretical research. However, comparedwith the theoretical analysis to calculate the optimal investment, enterprise investmentdistortion problems always exist. Investment distortions including overinvestment andinsufficient investment, the traditional finance theory mainly from the principal-agenttheory and asymmetric information theory to explain the investment distortions, it is verydifficult for the reality of some investment vision to give a reasonable explanation. Go upcentury70time, academia put forward traditional theories are based on the hypothesis ofrational man, if to relax this assumption, is not completely rational person hypothesis,closer to the reality of the situation. In1986, Roll debut with Managerial OverconfidenceTheory to explain the company decision-making problem, open the managerial overconfidence in the financial decision making to use on the curtain. So far, many domesticand foreign scholars are pushing the development of behavioral finance and development.However, managerial overconfidence metric, managerial overconfidence on financialdecision-making influence is still a problem to be solved urgently.This article from the behavioral finance theory, explore the managerialoverconfidence on corporate investment behavior. With the background of managercharacteristics as overconfidence measure index, introduced the management sex, age,education, length of service in four dimensions, and use the principal component analysismethod of reducing dimension, to further simplify the managerial overconfidence measureindex. And then used to quantify the managerial overconfidence, research on corporateexcessive investment, as well as Manager Overconfidence and corporate governanceinteraction. With06-10two stock markets the empirical data of listed companies,demonstrated overconfidence management tends to overestimate gains, leading toexcessive investment.This paper draws the following conclusions: overconfident managers tend toexcessive investment, and have higher cash flow sensitivity, when sufficient cash flow,overconfident managers tended to excessive investment; the board size, overconfidencecaused excessive investment is more serious; managerial ownership increases, can’t remission of overconfidence caused excessive investment.