Listed Company Executives Overconfidence, Excessive Investment And The Value Of The Company

In recent years, the executives of listed companies generally show overconfidence behavior, thereby expand the investment scale blindly. They put the company resources into some areas of overcapacity, which leads to the waste of corporate resources and production factors, then brings about serious obstacles to company’s growth and development, also brings about the adverse effect on the healthy growth and development of the society. That overconfidence psychological factors can cause companies which in good condition to expand the investment scale and production field blindly, and give rise to distorted diversification of companies. This impulsive investment decision causes the company capital to be tied up in the field of overcapacity, but can’t give the timely supplement to some areas that need the money. This make the company funds present vicious cycle, greatly damages the value of the company, and even will make the company go bankrupt. Past researchs is mainly aimed at the relationship between two variables such as executive overconfidence and corporate value, executive overconfidence and excessive investment. Few studies have been did to explore the chain relationship between executives overconfidence, excessive investment and the company value. The contributions in this article is as follows:(1) It introduces the newest research results of behavioral finance and psychology into the field of corporate governance, and then study the irrational behaviors of the executives of listed companies.(2) Chinese scholars did few empirical studies in the area of executives overconfidence in listed company, especially researchs about executives overconfidence, excessive investment, combined with the value of the company’s is fewer. This paper supplements the research contents of corporate governance theory and explores the influence mechanism between executives overconfidence and company value of listed companies, which attempts to reveal the "black box" between executives overconfidence and corporate value. This paper, to a certain extent, broaden the research angle of the existing corporate governance theory, guides the company’s operating practices more practically.Based on the background, the author states the related theoretical basis about domestic listed company executives overconfidence, excessive investment and the value of the company, and then review the related researchs between executives overconfidence and excessive investment of listed companies on the basis of reading of vast amount of literatures at home and abroad. On this basis, it puts forward the hypothesis of this article, determines the specific measure methods of relevant variables, builds the relevant theoretical model, and select the relevant data of listed companies from2009to2011as the research sample. Through the empirical test and analysis, this research conclusions of the article are as follows:There correlation between executives overconfidence and the value of the company is significantly negative; There correlation between executives overconfidence and corporate excessive investment behavior is significantly positive; There correlation between the company’s excessive investment behavior and the value of the company is significantly negative; Enterprise excessive investment behavior is the intermediary variable between executive overconfidence and the value of the company, it can produce transfer effects between the two.At the end of the article, according to the research process and empirical research conclusions obtained in this paper, put forwards the policy suggestions and expected to provide some help and support to solve the practical problems existing in the process of corporate governance.