Impact Of R&D On Corporate Performance Under The Perspective Of Managerial Overconfidence

Under the context of accelerated integration of global economic，enterprises arefacing unprecedented opportunities and challenges, the importance of Research andDevelopment is increasingly prominent. In recent years, the research and developmentinvestment of our country is increasing, but the performance of research anddevelopment is far lower than the Western countries. Enterprises’ research anddevelopment activities are the main source to enhance corporate competitiveness andgain competitive advantage. If enterprises want to survive in the increasingly fiercecompetition, they must strengthen the research and development investment,constantly update production technology in order to maintain a dominant position inthe enterprise market competition and ensure the long-term development ofenterprises. Currently, many scholars have studied the influencing factors of researchand development in terms of corporate governance、 enterprise features and theexternal environment, however, the underlying assumption in these studies is that themanagers are rational decision makers, they ignore the irrational behavior especiallymanagerial overconfidence can also influence the corporate research and developmentinvestment. In recent years, with the development of behavioral finance, somescholars studied the impact of manager’s irrational behavior especiallyoverconfidence on research and development investment. However, few studies havestudy the different impact of research and development that is implemented byrational managers and irrational managers on corporate performance. Therefore, fromthe perspective of managerial overconfidence, this paper make a comparative study ofthe impact of research and development investment which is implemented by rationaland irrational managers on corporate performance.Based on A-share market high-tech enterprises, on one hand, this paper analyzesthe impact of managerial overconfidence on corporate research and developmentinvestment; on the other hand, this paper make a comparative study of the impact ofresearch and development investment which is implemented by rational and irrationalmanagers on corporate performance. The results show that, managers of our samplehave overconfident managers. The research and development intensity of high-techlisted companies of our country is still low, far from the minimum requirements ofresearch and development investment of high-tech enterprise management approach. Managers’ overconfidence has a significant positive impact on corporate research anddevelopment investment; in other words, overconfident managers tend to invest morein research and development. The research and development implemented by rationalmanagers and overconfident managers have a significant impact on current corporateperformance and corporate performance in the coming year. In other conditionsunchanged, the research and development implemented by rational managers have abigger impact on current corporate performance and corporate performance in thecoming year compared to the research and development implemented byoverconfident managers.Above all, managers and executives are the makers of enterprise strategies; theirirrational behavior is bound to affect the corporate research and developmentinvestment. Therefore, from the perspective of the theory of behavioral finance tostudy the relationship between managerial overconfidence and research anddevelopment has important theoretical and practical significance.