The Research On The Influence Of CFO Overconfidence On The Decision Of Company's Investment

As one of the key factors affecting the company's operation and management,investment activities are crucial to enhance the value of the company.However,in reality,many companies have different degrees of non-efficiency investment behavior.Based on this,domestic and foreign scholars have carried out a lot of research on corporate investment decisions,but most studies are based on traditional financial theory,and think that managers are rational and ignore the influence of managers' psychological factors on investment decisions.Roll(1986)first introduced overconfidence into corporate finance research,which provided us with a completely new perspective for explaining the company's inefficient investment.As the chief financial officer,CFO plays an irreplaceable role in modern corporate governance.Through the investment and financing management,CFO improves the efficiency of resource allocation and uses financial means to participate in the company's business decision-making and strategy formulation.Therefore,from the perspective of overconfidence,studying the influence of CFO overconfidence on the company's investment decision-making can provide useful ideas for explaining the company's inefficient investment behavior.This paper attempts to study the impact of CFO overconfidence on the company's investment decisions,starting from two aspects of capital investment and R&D investment.Through the research we find that: First,there is a significant positive correlation between overconfidence of the CFO and the growth rate of the company's investment expenditure.That is,overconfidence in the CFO is likely to lead to over-investment and irrational behavior in manufacturing listed companies.Second,CFO overconfidence in the company has a higher investment-financing cash flow sensitivity,that is,when the company's higher level of financing cash flow,more likely to stimulate the CFO's investment desire;Third,in the A-share listing company,there is a significant positive correlation between CFO overconfidence and the company'sR&D investment level,and the larger the company,the higher the value,the stronger the profitability,the more inclined to increase R&D investment.However,the higher the debt level,the more reluctant to engage in R&D activities due to the impact of debt pressure.Fourth,overconfident CFO tend to do more research and development in high-tech firms than non-high-tech firms activity.Although in recent years,some domestic scholars have studied the investment decision-making of the company based on the irrational perspectives of managers,most of them start with the overall management of managers and study the the impact which the overconfident managers have on the company's investment decisions,and little research on the CFO,a senior executive in charge of financial work.As the top financial supervision of the company and decision-makers,CFO overconfidence may lead to non-optimal company investment decisions,affecting the realization of the maximization of the value of the company.Based on the perspective of overconfidence,this article will explore the mechanism of CFO overconfidence on the company's investment decision-making,which will deepen the existing research results and,further enrich and perfect the behavioral finance theory.Meantime,this study can help CFO to avoid cognitive traps and effectively evaluate and select investment decisions from the perspectives of psychology,behavioral economics and behavioral finance theory on the basis of self-awareness to reduce the financial burden caused by overconfidence;it also helps companies to improve their internal governance structure to constrain the CFO's psychological bias of overconfidence on its investment decision-making behavior and improve the rationality of corporate investment decisions.