An Empirical Study On The Influence Of Managerial Overconfidence On Cash Dividend Policy In The Listed Companies

Since Miller and Modigliani proposed the dividend irrelevance theory, the company’s dividend policy is gradually becoming a hot problem of research in the financial area. Both domestic and foreign scholars have tried to explain the reasons for the company’s dividend policies through setting up many theories, including catering theory of dividends, clientele effect theory, agency cost theory, tax differential theory, signaling theory, herd effect theory of dividends, a bird in the hand theory and so on. However, most of the study assumed that company’s managers are fully rational decision makers, ignoring the impact of the managers’ irrational behavioral on the company’s dividend policy. Existing study has shown that overconfidence is prevalent in corporate managers. Therefore, it is very necessary to explore the impact of managerial overconfidence on cash dividend policy of Chinese A-share listed firms.Firstly, this paper describes the background and significance, research content,research methodology and framework of the paper, as well as innovation of this article; Secondly, this paper gives a review of related literature on dividend policy and managerial overconfidence. Thirdly, this paper analyzes the current situation of the cash dividend payment behavior of the Chinese listed companies according to industry, annual and complex. Fourthly, this paper analyzes the reasons for the prevalence of managerial overconfidence of Chinese listed companies, on this basis, I put forward hypotheses between managerial overconfidence and the cash dividend payment behavior of the Chinese listed companies. Finally, I do the empirical test between managerial overconfidence and the cash dividend payment behavior of the Chinese A-share listed companies in Shanghai and Shenzhen. The empirical results show that managerial overconfidence can improve the will and level of the payment of company’s cash dividend.Based on the findings, we should take managerial overconfidence into account when listed companies establish cash dividend policies. Therefore, I propose the following recommendations: develop a scientific and rational management rewardsystem, in order to reduce the negative impact of managerial overconfidence on the company’s cash dividend policy; design a perfect and a comprehensive evaluation system of features of managers to gradually eliminate the managerial psychological deviation; improve the corporate governance mechanism to prevent the impact of managerial overconfidence on the company’s cash dividend policy; improve the democratic decision-making system in corporate dividend policy; improve the degree of transparency in listed companies’ dividend policy.