The Research On Impact Of Managers Risk Preferences On The Debt Financing On The Enterprise Life Cycle

In recent years, with the development of behavioral finance and behavioral corporate finance theory, the effect of managers’ irrational behavior on financial decision-making attracted numerous scholars. But so far, the e xisting researches of individual preference are mainly about investors. There are few studies focusing on managers’ risk preferences. In addition, the majority of the managers’ risk preferences studies are used for investigating the investing and financing level and the earnings management. Few scholars explore the relationship between the managers’ risk preferences and the level of debt financing from the perspective of enterprise life cycle. Given this, this paper uses a sample of the Chinese manufacturing public companies from 2008 to 2013 to carry out empirical study.First of all, this study discusses the differences of managers’ risk preferences and the level of debt financing in the different stage of enterprise life cycle. Afterwards, the correlation between the managers’ risk preferences and the level of debt financing has been tested from the perspective of the behavioral finance theory. Then, this paper investigates the difference of managers’ risk preferences and the level of debt financing in the view of enterprise life cycle. Eventually, given the special conditions of China capital market, this study employs the nature of the firm to research the moderating effect on the relationship between the managers’ risk preferences and the level of debt financing. The empirical results imply that:(1) In the different stages of enterprise life cycle, the managers’ risk preference and the level of debt financing exist a certain difference.(2) The managers’ risk preference is positive and significantly associated with the level of debt financing.(3) In contrast with growth and recession stage, the positive relationship between the managers’ risk preference and the level of debt financing is more significant in the mature stage.(4) The managers’ risk preference of the state-owned firms is lower than the non-state-owned firms. However, the debt financing level of the state-owned firms is much higher. Moreover, the nature of the firm weakens the positive relationship between the managers’ risk pref erence and the level of debt financing in addition to the samples of recession stage.