Political Connection,Overconfidence And Financial Flexibility

Due to the imperfect capital market,the internal and external financing costs are different,and the enterprises are generally faced with the problem of financing constraints.These companies can reserve reasonable levels of financial flexibility to capture future investment opportunities or cope with adverse shocks.Elastic enterprise have a stronger financial funding and calling ability,but in reality the same period of different enterprises financial flexibility level is uneven,the same enterprise in different periods of financial flexibility level is different.It is a question that many scholars pay attention to which factors affect the financial elasticity of enterprises.In the past,the study of financial flexibility has more discussed the influence of objective factors on financial flexibility,and ignored the influence of the main factor of managers behind decision making.The manager is the leader of the enterprise,which plays a leading role in the management process of the enterprise,and its psychological deviation will have an important influence on the financial flexibility.So how does the irrational psychology of overconfidence in managers affect the level of financial flexibility?Political connections are the political connections established by enterprises in order to obtain more resources and convenience.Does political association affect the financial flexibility of enterprises?Based on the Shanghai and Shenzhen 2012-2016 A-share listed companies as the research object,combined with the theoretical analysis and empirical test,and analyses the influence of political association,managers overconfidence respectively the influence of enterprise financial flexibility,as well as the mutual influence of both.The results show that the political association and overconfidence of managers are negatively correlated with the financial elasticity of the enterprise.Political association and overconfidence of managers show substitution effect on the financial flexibility of enterprises.The innovation of this paper is that few scholars have studied the relationship of financial flexibility from the perspective of managers.This paper gives up the basic assumption of complete rationality,and studies the relationship between overconfidence of managers and the level of corporate financial flexibility from irrational reality.At the same time,it deeply analyzes how the external non-institutional mechanism of political association influences the financial elasticity of enterprises.It also analyzes the influence of political association and overconfidence on financial flexibility.