The Empirical Research About Managers Overconfidence’s Influence On Company Performance

To create value is the most basic goal of company, so it is very necessary to study thevalue of the company. With the development of behavior financial theory, scholars takesome psychological factors of the managers into account, such as overconfidence, overlyoptimistic etc. Psychological research shows that managers as the principal part of thecompany’s decision have the psychological deviation of overconfidence, their irrationalcharacteristics will affect the company’s performance. Thousands of years of Chinesetraditional culture is ingrained, this makes the Chinese people are more likely tooverconfidence, so under the special background of Chinese it is has importantsignificance to research managers overconfidence how to influence the firm performance.This paper takes the China’s manufacturing listed companies between2008and2012as research sample. It uses factor analysis to get comprehensive score as a substituteindicator of a company, with management ownership changes to measure managers’overconfidence, introducing the excessive investment as adjustment variables, and uses theSPSS statistical software to research the managers’ overconfidence how to influence thefirm’s performance empirically. According to the results, we put forward relevant policysuggestions about the way to enhance the company performance.The empirical results can be concluded that:(1) managers’ overconfidence of Chineselisted companies has positive impact on the performance of company. Based on the modernhousekeeper theory, manager’ overconfidence makes them have a optimistic attitude aboutthe company’s performance. This would increase the staff’s enthusiasm, improve theoperation efficiency of the company, and improve the company performance finally;(2)the managers’ excessive investment behavior can reduce the positive influence aboutoverconfidence to firm’s performance. Overconfidence managers often overestimate the expected return of the project, underestimate project risks, and to invest in the project, sooverconfident managers are more likely to produce excess investment behavior, this kindof inefficiency investment will damage the company’s performance.