The Research Of The Effects Of Managerial Overconfidence On Financial Flexibility

Financial flexibility is an important strategic decision of the enterprise,the level of it affects the ability to access funds when enterprises fall into financial distress or good investments appear.The level of financial flexibility as a strategic decision is not only affected by the actual financial situation of enterprises,but also affected by managerial personal inclinations and traits of the financial decision makers.Standard mainstream economics think people are rational people who's decisions are basically unbiased,but in real life,people are not entirely rational.With the rise and development of behavioral corporate finance,managerial overconfidence is noticed by scholars.Currently,there are lots of literatures which are relevant with managerial overconfidence which mostly focused on the effects of management overconfidence on the corporate financial decisions.The financial flexibility as an important decision of company managers will also be affected by the irrational characteristics of managers,so this paper mainly studies the direct impact of managerial overconfidence on corporate financial flexibility.This paper selects the unbalanced panel data of the SH and SZ listed non-financial companies from 2011 to 2014 as samples of empirical analysis.Using the earnings forecast deviation to measure the managerial overconfidence and using financial flexibility index to measure financial flexibility.The empirical findings conclude three points:(1)The enterprises of managerial overconfidence have lower financial flexibility compared with the enterprises of non-managerial overconfidence;(2)Compared to state-owned enterprises,the effect of managerial overconfidence on the company's financial flexibility is more significant in non-state-owned enterprise;(3)Other conditions remain unchanged,the effect of managerial overconfidence on the company's financial flexibility is more significant in a competitive enterprise than the non-competitive enterprises.