Research Of The Effect Of Corporate Governance On The Relationship Of Managerial Overconfidence And Accounting Conservatism

Managerial overconfidence means that managers overestimate the ability to decide,therefore overestimate future performance and underestimate future risk of the company.The estimates of the managers for the company’s prospects are very important to the decision-makings of the company.Managers who are overconfident would influence many aspects of the company because of their phycholigical deviation.And accounting conservatism is one of them.Accounting conservatism includes unconditional accounting conservatism and conditional accounting conservatism.The effect of overconfident managers on accouting conservatism varies with the corporate governance circumstance.Therefore.researches on the interacts of these three concepts would help us make related decisions better,and serve related stakeholders better.The paper examines managerial overconfidence’s influence on accounting conservatism through theoretical and empirical method.Also the paper examines how different corporate governance affects these two variables.First,based on the review of the related research at home and abroad,the paper recommend the definition and reason of managerial overconfidence,and the influnces on company decisions.The paper also recommend the definition,types and reasons of accounting conservatism.Next,based on the theoretical research,the paper proposes five hypotheses,and chooses A-share listed companies from year2009to year2012as samples to do the linear regression.Finally we find that:(1)Managerial overconfidence is not significantly negatively related to unconditional accounting conservatism.but it is significantly negatively related to conditional accounting conservatism.(2)The higher of ownership concentration(ie,the higher of shareholdings of the top one shareholder),the much more negative relation between managerial overconfidence and accounting conservatism.(3)The higher of shareholdings of institutional investors,the less negative relation between managerial overconfidence and two types of accounting conservatism.(4)In the state-controlled company,overconfident managers would decrease accounting conservatism much more than in the non-state-controlled company.(5)The negative relation between managerial overconfidence and conditional accounting conservatism does not get smaller when the insider directors’ proportion increases.