Managerial Overconfidence?Governance Roles' Intervention And Corporate Inefficient Investments

The purpose of corporate governance is to make business decisions scientific and effective,and an effective way to solve the current problem of inefficiency investment in enterprises is to formulate scientific and effective corporate governance mechanisms.However,whether the corporate governance mechanism is scientific depends on the following two factors: One is the conflict between managers and stakeholders;the other is the cognitive bias based on managers' overconfidence.Nowadays,studies at home and abroad show that the supervision and intervention of various governance entities have different effects on the investment decisions of companies.However,does the intervention of each governance entity influence the psychological bias of managers' overconfidence? In other words,does the intervention of each governance entity promote or inhibit the inefficient investment of the company due to overconfidence of managers?The “control illusion theory” mentioned in behavioral finance provides some valuable theoretical basis for this situation,that is,people always think that they can completely control events beyond their own capabilities.Especially in the context of corporate managers with rich management experience and professional knowledge,this illusion can lead to their unreasonable self-confidence.The related literature points out that the degree of control illusion that people have depends on the amount of decision-making and control power they have.The intervention of governance entities can precisely affect the business managers' decision-making power,thus affecting the control illusion of managers.Therefore,the intervention of the governance entity can influence the manager's overconfidence through the control illusion of the manager,and then influence the investment decision of the company.Based on the above background,this article takes all the A shares of listed companies in China from 2007 to 2016 as the research objects,through empirical research methods,On the one hand,it examines the impact of managers' overconfidence on the company's inefficiency investment;On the other hand,it examines the direct effect of the monitoring and intervention of governance entities on the inefficiency investment of enterprises.Finally,it examines the impact of supervision and intervention of the governance entity on the inefficiency investment of the company caused by the manager's overconfidence.The research results show that overconfidence of managers significantly aggravates inefficient corporate investments;the intervention of majorshareholders and governments not only promotes inefficiency investment through the deterioration of principal-agent conflicts,Moreover,it promotes the positive correlation between overconfidence of managers and inefficiency investment of enterprises by aggravating managers' control illusion;The creditor's intervention not only inhibits the company's inefficiency investment directly by contracting in order to limit the scope of the company's activities,especially inhibit the excessive investment of the company,but also can restrain the inefficiency investment of the company by acting on the managers,that is,suppressing managers' overconfidence.