The Relationship Between Ceo Overconfidence And Corporate Financing Behavior

Financing behavior of listed companies in our country generally believed thatthere was equity financing preference, but these theories are based on the “hypothesisof rational man”. Those can not explain some of "strange phenomenon" in the reality,such as excessive investment, frequent mergers and acquisitions. In this case,psychologists and economists have studied managers "irrational" behavior and foundthat overconfidence problems were common among people, especially top manager,which developed behavioral finance of combining psychology and the financial theory.Many scholars studies on the relationship between managers’ overconfidence andcorporate financing behavior, and they found the conclusions did not agree withearlier research conclusion. However, these studies neglect CEO’ power have agreat influence on CEO’ overconfidence, because some research suggest that CEO’power have a moderating effect on overconfidence. Therefore, this paper will studythe relationship between CEO’ overconfidence and corporate financing based onpower.This dissertation takes the Chinese listed companies as research sample to studythe following question. Firstly, the relationship of CEO’ overconfidence to corporatefinancing behavior of listed companies. Secondly, whether CEO’ power haveinfluence on corporate financing behavior? At last, whether CEO’ power have impacton overconfidence and it will affect corporate financing behavior?The results based on empirical test show that overconfidence have a significantimpact on the corporate asset-liability ratio, but it have no significant impact oncurrent liabilities. CEO power has many variables, only some have significant effectson corporate debt levels. CEO is also director and shareholder will reduce the level ofasset liability ratio. If the total cash compensation an CEO received divided by thecompensation of top three earners paid manager in the same firm is higher, the current liabilities will higher. CEO shares will increase current liabilities. CEO who works inother corporate will decreases current liabilities. Only two variables have moderatingeffect between overconfidence and financing behavior. Those are CEO is chairmanand CEO is not director.