Ownership, Managerial Overconfidence And Debt Financing Behavior

With the rise of behavioral corporate finance, the irrational behavior of themanagers, especially the research about the relationship between cognitivebias of overconfidence and the company’s financial decision, graduallybecome a new research hot spot. Overseas research has made someachievements, however the empirical research which among ownership,managerial overconfidence and debt financing behavior in China is still lack.Therefore, this paper attempts to analyze state-owned listed companies andnon-state-owned listed companies, there is any difference about the impact ofmanagerial overconfidence to debt financing behavior, and how managerialoverconfidence affect company’s value which through the capital structure.This paper adopts normative research and positive research, firstlyintroduced background, purpose, meaning, methods, and main innovations;Secondly, introduced financing theoretics, managerial overconfidencetheoretics, literature and literature review, in order to make the theory belowfor the empirical study; Thirdly, described the changes of China’s currentfinancing environment and analyzed the financing behavior of Chinese listedcompanies; Fourthly, by constructing multiple regression models, collectingcorrelative data, using the econometric-based empirical research methods,this paper compared state-owned listed companies and non-state-ownedlisted companies, there was any difference between capital structure and debtmaturity structure, when manager is overconfidence, as well as howmanagerial overconfidence affect company’s value which through the capitalstructure. This paper’s main contribution incarnate in the following areas:1. There is difference between two different forms of ownership about theimpact of managerial overconfidence to company’s debt financing behavior.Managers in state-owned listed companies, generally showing moreoverconfidence and more inclined to debt financing than in non-state-ownedlisted companies, and in non-state-owned listed companies, managerial overconfidence is not an important factor which affects the capital structure.Both in state-owned listed companies and non-state-owned listed companies,managerial overconfidence would result in an inclination of long debt maturity,and such inclination is more notable in state-owned listed companies.2. Managers overconfidence selects a high-leverage has more negativeimpact to company’s value than selects a low-leverage, which has beenverified in different ownership company, and such impact is more notable instate-owned listed companies.Based on the theoretical analysis and empirical research, this paper hasmade conclusions that managerial overconfidence is a significant element thatimpacts the company’s debt financing behavior and also affects the creation ofcompany’s value, just like other company’s financial indicators. Therefore, themanager’s irrational behavior must be considered as an important factor in thestudy of the company’s financial decision-making behavior.