Empirical Study Of Managerial Overconfidence,Corporate Expansion And Financial Distress

As China's economy has entered a period of rapid development,expansion has become one of the ways companies have grown stronger.However,in reality,many companies' expansion activities not only fail to achieve the desired results,but also allow companies to assume greater financial risks.Most managers generally have psychological biases,and the overconfidence characteristics of decision-makers directly affect corporate investment and mergers and acquisitions.This article is based on this background to explore the regularity of managerial overconfidence,corporate expansion and financial distress.Based on the mainstream financial theory,this paper first identifies relevant definitions such as managers' overconfidence,and analyzes in detail the situations in which managers who are overconfident have adopted blind expansion to make the company fall into a financial dilemma.Secondly,the data of listed company A-shares from 2012 to 2016 was selected.Based on the changes in the number of shares held by top executives as a proxy for overconfidence,a basic model for verification hypotheses was established to quantify the relationship among the three.Finally,for the empirical analysis results,put forward constructive opinions.Through the analysis of the regression results,the paper concludes the following main conclusions:(1)The higher the manager's degree of overconfidence,the more likely the company is to fall into a financial dilemma;(2)The more free cash flow may lead to overconfidence,the more managers tend to Internal investment;(3)Managerial overconfidence is positively related to the choice of corporate M&A behavior;(4)Enterprise expansion plays an intermediary role in the relationship between managerial overconfidence and financial distress.The research in this paper starts from behavioral finance and limited rational behavior,further analyzes the phenomenon of dissimilation in the process of production and operation of an enterprise,and at the same time provides an accurate basis and new ideas for the management to make financial decisions.