Empirical Research Of The Effect Of Managerial Overconfidence On Company Performance For The Listed Companies Of Chinese Growth Enterprise Board

With the further research of some abnormal phenomena of the market economy, the assumption that the behavior person is rational is more and more questioned under the traditional theories of corporate finance. More and more results prove that the behavior of people in real life can not be completely rational, and some irrational psychology will have an effect on their behavior and forming a so-called ‘behavioral finance’ academic branch. With the development of behavior financial theory, scholars extend the theory and application of behavioral finance to the corporate finance field, taking some psychological characteristics of the manager into account, such as over confidence, regret, and expectations etc, probing into its impact on company performance and other issues. The related psychological research found that the overconfidence is widespread in peoples’ psychology, especially for corporate managers, it may have a very significant impact on the company’s performance.Managerial overconfidence problem also exists in China’s listed companies, so, it has a very important significance to research managerial overconfidence how to affect the corporate performance. This paper takes the GEM Listing Corporation as the research object, and selects the sample data of 2009-2014 years, using two surrogate indicators to measure the over confidence of managers, namely the change of the number of manager’s share holding and the comprehensive score of the managers’ background feature by principal component analysis, and comparing the difference between the two methods. Using ROE and ROA as the evaluation index of the company’s performance, using the multiple linear regression method to research the relationship between managerial over confidence and corporate performance. Finally, the relevant policy recommendations for reducing the negative impact of over confidence are proposed.The paper based on data of companies listed on GEM, the empirical results can be concluded that: Either of the alternative indicators, the manager’s over confidence has a negative effect on the company’s results. This is related to the managers overestimate the expected return and underestimate the risk of the project. This will result in the occurrence of over investment, leading directly to the decline of the company’s performance.