A Study On The Influence Of Managerial Overconfidence On Debt Maturity Structure Of Listed Companies In China

Since1958, Modigliani and Miller put up with their famous MM theory, manyscholars relaxed the strict assumptions of the MM theory and obtained many researchresults. As an important part of the capital structure, debt maturity structure, alongwith the evolution of capital structure theory, makes continuous development,including the trade-off theory, agency cost theory, the tax assumptions and theasymmetric information theory. These theories provide a theoretical basis for us tounderstand and solve the short-term and long-term debt ratio; however, they imply thefollowing two assumptions: perfectly rational and effectiveness of capital markets.They believe that managers and investors are rational decision-makers，whichobviously is inconsistent with reality.In the recent years, the research of psychology shows that people are notcompletely rational and likely to be risk aversion, too conservative or optimistic.Russo’s study found that up to99%of managers overestimate their own ability andtheir companies’ profitability. The development of behavioral finance in recent yearshas aroused the concerns of scholars for the relationship between the managers’irrational and corporate investment and financing decision-making. Viewing thecurrent domestic and international research literatures, researches on the influence ofmanagerial overconfidence on the investment decisions, dividend policy are more, butstudies on the effects of managerial overconfidence on debt maturity structure are few,especially the empirical researches are lagging behind.From the view of behavioral corporate finance, this paper takes the listedcompanies that disclosed performance prediction from2008to2010as samples, andconducts a study t on the influence of managerial overconfidence on debt maturitystructure in listed companies in our country. The empirical result shows thatmanagerial overconfidence is inversely related to debt maturity structure.Overconfidence managers overestimate their profitability of investment projects, andunderestimate the payback period, so they are willing to borrow more short-term debtto match the shorter payback period.