Research On The Relationship Between Corporate Governance, Managerial Overconfidence And Business Investment

Enterprise’s investment behavior is the main research in economics, corporate finance, and industrial organization theory. In real capital market, compared with some theoretical analysis of the optimum investment model, the enterprise will always appear the inefficient investment like under-investment and over-investment. The traditional investment which is based on the theory of MM’s theories has a series of hypothesis, so it can’t be flexible used in practice. Therefore, one of an important progress of enterprise investment theory is from a different direction to break through the several important hypothesis of MM theory. It provides a possible direction to analysis inefficient of enterprise investment.Relaxing the hypothesis of optimal model "economic man", This paper attempts to explain enterprise investment on behavior of managers overconfidence. On the other hand, as a safeguard enterprise healthy operation, corporate governance mechanism can make a proper balance the interest relationship among the shareholders, the board of directors and managers. The effective corporate governance mechanism should balances and corrects the irrational decision making by managers. Specific, firstly, the paper reviews existing research on the relationship among corporate governance, managers’overconfidence and enterprise investment, and establish the measure of managers overconfidence based on the analysis of the characteristics on the listed companies in China. The data of listed companies issued by stock markets of Shanghai and Shenzhen from2008to2010as the research object build a multiple regression empirical methods.This model in order to respectively test the relationship of managers overconfidence and investment level, and corporate governance directly influence the enterprise investment level, and corporate governance indirect influence enterprise investment level based on managers overconfidence. Empirical results obtained can be support theoretical model conclusion in a certain extent, but we can observe from the results that the corporate governance of listed companies in China still has the insufficient place. Finally, based on the analysis of the conclusion, the paper presents the deficiencies and policy Suggestions.