Influence Of Senior Managerial Overconfidence On Cash Dividend Policy For Listed Companies

In the listed companies of China，there is a ubiquitous problem of senior managerialoverconfidence. The irrational cash dividends decisions will not only damage theinterests of shareholders or the investors, but also hinder the company from developing.Based on this Situation, this paper clears up and summarizes relevant domestic andforeign literatures. Discarding the hypothesis with rational managers which isadvocated by traditional theory, and using China’s A-share listed companies from2010to2012as the sample, this paper then tries to study the relevance between managerialoverconfidence and cash Dividend distribution policy in Chinese listed companies withnorm and empirical analysis, also the restriction effect of company’s growth andownership structure to the relevance.It constrains the development of the theory for the indicator to measure managers’overconfidence having not formed any unified standard. In the third chapter, this paperpreliminary demonstrates the feasibility and rationality of taking the differencebetween company earnings forecast and actual net profit as the continuous substitutionvariable of managerial overconfidence. Then it studies the effect mechanism of thesenior managers’ overconfident psychological preference on the companies’ cashdividend payout policy by setting up an appropriate mathematical model theoretically.This paper then puts forward three core propositions that are worth to be discusseddeep. Using a sample of Chinese A-share listed companies which issued predicted netannual profits from2010to2012, the empirical part explores the influence of seniormanagers’ overconfidence on dividend distribution behavior by multiple regressionmodels. The results show as follows：overconfident managers tend to distribute lowerdividend to raise internal financing；the stronger the company’s growth is，the moresignificant influence of senior managers’ overconfidence on cash dividend distribution.That is to say, the reduction in cash dividends associated with managementoverconfidence is greater in companies with higher growth opportunities; while theirrational behavior due to senior managers’ overconfidence can be effectively reducedby equity balance.Finally, based on the empirical research results, we present some policyrecommendations to overcome the adverse effects of overconfidence. They are asfollows: establish scientific learning system and warning index; adopt corresponding monitoring policy at different stages of companies’ development; avoid the existenceof dominant shareholder; complete and perfect the independent director system inchina’s listed companies.