The Empirical Research On The Influence Of Managerial Overconfidence On Investment Decisions

As one of the company’s core financial activities, the company investment has always been a hot topic to academia and practice field. The right investment decisions can greatly improve enterprise value, however, distorted investment behavior such as excessive investment and investment shortage will damage the company value, even make the enterprise into financial distress. Traditional investment theory is based on rational economic man hypothesis, but in reality, there are a lot of non efficiency investment, making people began to doubt whether investors can be always rational. In the1980s, many scholars began to consider the managers character trait, studying the irrational mental especially overconfidence psychology can in which way influence the investment behavior, a lot of research results also confirmed that managers overconfidence will lead investment deviation.This dissertation generalizes the related theory and summarizes research results that based on managers overconfidence perspective on the investment behavior effection. After the analysis, this paper puts forward reasonable hypothesis. At the same time, this dissertation makes adjustment to the existing overconfidence measurement of overconfidence, using shareholding ratio change of managers to measure enterprise executives overconfidence degree.The related financial data was from Shanghai or shenzhen securities market period between2010and2011. By applying descriptive statistics, correlation analysis and regression analysis, this article try to find out the relationship between managers overconfidence and enterprise investment.According to the empirical, this dissertation comes into the following conclusions:The overconfident managers tend to overestimate project profitability, underestimate the risk. Especially in the shortage of cash flow,they are inclined to overestimate external financing costs. All of this will lead to problems such as excessive investment; For company with overconfident will get a higher investment-cash flow sensitivity, the higher overconfident degree will accompany higher invest-cash flow sensitivity; More serious financing constraints, more higher investment-cash flow sensitivity; But the correlation between proportions of the independent directors and investment is not significant. In the end, the dissertation proposes several suggestions include:paying attention to and guiding managers personality psychological, reinforcing the ability of information disclosure, consummating the enterprise investment project evaluation system, improving corporate governance structure to raise the independence of independent directors.