Research On The Influence Of Executives' Overconfidence On Corporate Investment Behavior

Investment is an important activity in the development of an enterprise and an indispensable driving force for China's economic development.At the macro level,investment is one of “the three carriages” to stimulate economic growth.It is closely related to the amount of China's gross domestic product.Therefore,we can say that investment is a major event related to the national economy and the people's livelihood.At the micro level,effective investment is the source of good development of enterprises.The result of the company's investment activities directly affects its ability to achieve sustainable development and strategic goals.However,in reality,corporate investment behavior is often distorted,resulting in excessive or insufficient investment.Traditional financial theory usually uses information asymmetry theory and principal-agent theory to explain these phenomena,but the above theories all assume that managers are “rational economic people”.In reality,this assumption is not reasonable.Managers can't be completely rational,and their irrational psychological deviations will be reflected in corporate investment decisions,which will have an impact on the company.Therefore,people have introduced psychological perspectives in the study of financial theory,and began to pay attention to the influence of manager irrationality on the company's capital allocation behavior.This paper puts the most typical irrational psychological factors of overconfidence into the research scope,and studies the influence of executive overconfidence on corporate investment behavior.In addition,in recent years,capital market reforms have been in high spirits,and research on equity governance has contributed to the improvement of corporate governance structure and the future development of enterprises.As an important part of equity governance,equity balances can not be ignored in corporate governance.Then,whether equity balances can have a certain impact on the consequences of executive overconfidence,thus effectively curbing the enterprises investment bias caused by this irrational psychology? From the perspective of the adjustment function of equity balances,this paper studies these problems based on the previous research and argumentation,combining the theory and empirical research,in order to make my own contribution to the governance and development of listed companies.This paper selects the data of China's A-share listed companies from 2008 to 2017 as a research sample,and uses Excel and stata14.0 to process and analyze the data.The article uses a combination of theory and empirical methods to study the relationship between executive overconfidence and corporate investment,and the adjustment effect of equity balances on the relationship between the two.In the empirical study,it uses stratified progressive method,regional and property grouping method.The results show that: 1.Compared with rational executives,executives with excessive self-confidence will significantly improve the level of corporate investment activities.Geographically,the eastern and central regions are more significant than the western regions.The positive correlation between overconfidence and investment level will vary with property rights.This positive relationship is clearer in non-state enterprises.2.Equity balance have a negative adjustment effect on the relationship between overconfidence and corporate investment level,that is,the improvement of the level of equity balance will control the positive relationship between overconfidence and investment level.The eastern,central and western regions are gradually weakening.From the perspective of enterprises with different property rights,compared with state-owned enterprises,in non-state-owned enterprises,equity balances have a stronger negative effect on overconfidence and corporate investment.It can also weaken the positive impact of overconfidence on investment levels.According to research findings,we propose the following recommendations: 1.Correctly understand the irrational characteristics of managers' overconfidence.2.The learning effects of executives should be strengthened to gradually reduce their degree of overconfidence.3.Accelerate the improvement of the company's equity balance mechanism.4.Establish scientific and rational investment decision-making and evaluation mechanisms.