Research On The Impact Of CEO Overconfidence And Accounting Conservatism On Cash Flow Risk In Enterprises

Psychological studies have shown that most people have a mental deviation from overconfidence,not to mention executives at the top of the Pyramid.Overconfidence bias directly affect the enterprise decision-making and enterprise value,entrepreneurs and executives overconfidence problems worthy of attention.With in-depth research on financial flexibility and liquidity,cash holdings have become an important issue.The absolute amount of cash holdings is increasing.However,half a year's cash flow is negative,that is,cash shortage exists.Is it true that the absolute value of holding cash is still not enough,or the way of measuring cash shortage is out of order.So this paper studies the relationship between executive overconfidence and cash flow risk from the perspective of risk.Accounting conservatism as the research of internal governance mechanism is numerous.This paper tries to start with how accounting conservatism affects executive decisions,and studies the impact of executives' overconfidence and accounting conservatism on cash flow risk.This paper selects data from 2007 to 2016 in the company board,small board,the gem,the relative compensation level of selection of managers and the change of the number of shares and the management measure of overconfidence,the residual value at risk and measure of cash flow risk,the C-Score measure of accounting conservatism,the market value of enterprise the value of the relationship between risk of overconfidence,accounting conservatism and cash flow.The results show that the more executives overconfidence,more will continue to open a new project,make enterprises in turbulence in the future unexpected circumstances,enterprises will face the risk of cash flow;accounting conservatism can promote executives to start new projects,explore the advantage of learning as the internal mechanism,but also overcome the bad news of overconfidence ignored shortcomings let the enterprise in a stable operation,which can effectively reduce the overconfidence caused by the cash flow risk.The interaction of accounting conservatism and overconfidence,will ultimately improve the value of the enterprise.