| During the operation and production of company,the ownership of capital and the right of use of capital are separated by modern company structure theory.The separation means that a group of investors or creditors use their capital in company’s daily operation,the companies pay them dividends and interests in return.These dividends and interests are the funding cost of companies which are linked with the capital structure and one of the major costs of daily operation.Usually the management is on behalf of planning,operating and some other important decisions making,so the character of management could have influence to the cost and the performance of the company.In 1958,Modigliani and Miller create the MM Theory which made researchers pay more attention to capital structure and funding cost.Information Asymmetry Theory,Agency Theory,Market Timing Theory and other classical theories made the relationship between capital structure and funding cost more clearly.While these classical theory have a common base called "rational person hypothesis" which means people make decision fully rational.In real life,the hypothesis does not exist and the practical significance of the theory is debatable.Researches have showed managerial overconfidence exists in real life which have influence in operation period.Recent years,because of credit problems,getting loans from commercial banks and financing through issuing bonds and stocks became more difficult which made the research essential.The research is divided into six chapters.The first chapter is the introduction which contains the research background,research significance,research structure,innovation points and shortcomings of the article.The second chapter is literature review which introduces the research results of overconfidence of management,financing structure and financing cost both domestic and overseas.The third chapter is theory analysis.It introduces the basic theory of managerial overconfidence,capital structure and financing cost briefly.It mainly analyses the inside logical relationship between managerial overconfidence,capital structure and financing cost.According to the logical relationship,it puts forward three hypothesizes.The fourth part is the measurement of variables.It introduces some basic measurements of managerial overconfidence and decides the suitable measurements.It also introduces how to calculate the total funding cost,debt funding cost and equity funding cost in the article.According to previous work,it leads in several control variables and give the reasons.The fifth part is research design which introduces the resource of the data and set up models according to hypothesizes.And we draw conclusions from the empirical analysis of measurement model.In conclusion,overconfident management could use more debt especially short-term debt to finance which results in higher cost.The final part is the policy advice and research outlook in corporate governance and some relative parts. |
