Research On The Relationship Between Innovation Investment,CEO Overconfidence And Firm Performance

The current complex and ever-changing domestic and international environment is both a challenge and an opportunity for the development of Chinese companies.Innovation investment has become a great magic weapon for all types of enterprises to continue making profits during the difficult or transition period.Enterprise technology innovation is a systematic project.The continuous improvement and development of technical capabilities requires a large investment of people,money and materials and also put forward higher requirements for the operation and company performance.As the person in charge of the company,the CEO's specific decision-making and judgment behavior has an important impact on the operation and management of the company.Psychological experimental research shows that human beings can't always be completely rational,and it is easy to show systematic irrational behavior when making decisions.Overconfidence is a typical representative.Managers are prone to overconfidence under certain conditions and backgrounds.Then,will CEO's overconfidence affect the innovation investment of the company and ultimately affect the performance of the company?Based on the above problems,this paper takes 1261 listed companies in Shanghai and Shenzhen A-shares from 2009 to 2015 as research samples.Based on the theory of principal-agent,overconfidence and innovation,and use the method of literature review,comparative analysis and empirical analysis,this paper studies the impact of innovation investment and CEO overconfidence on corporate performance.Firstly,it analyzes the impact of innovation input on enterprise performance from two aspects: innovation investment level and change.Secondly,it discusses the relationship between CEO overconfidence and enterprise performance from the two dimensions of external overconfidence and internal overconfidence,and further studies difference in ages.Thirdly,analyze the mediating effect of internal control on overconfidence and corporate performance under different innovation environment.This paper mainly draws the following conclusions: First,the innovation investment is positively related to the enterprise performance of the first phase,and the more innovation investment,the faster the growth,the better the firm performance.Second,CEO overconfidence will strengthen the improvement of corporate performance,and the younger the CEO,the higher the confidence,the more significant the relationship between innovation investment and corporate performance.To a certain extent,it reflects that the overconfident CEOs usually overestimate the income and underestimate the risk,which will enable the executives to increase investment in high-risk projects such as innovation and drive the growth of corporate performance.Third,the less innovation investment a company has,the more significant the internal mediation of overconfidence and corporate performance.It shows that internal control plays an important role in the corporate governance structure.Good internal control can correct the irrational behavior of CEO overconfidence to increase corporate value.When enterprise innovation investment is insufficient,internal control can ensure the consistency of CEO decision-making and shareholders' interests.This paper focuses on the relationship between innovation investment,CEO overconfidence and corporate performance,which enriches the connotation of related research and has certain theoretical significance.Through the discussion of overconfidence,It is of practical significance for companies and investors to treat the behavior of overconfident executive rationally and comprehensively,which has certain practical significance for manager selection and incentive.