Managers' Overconfidence,Endogenous Financing And Corporate Performance

Financing decision-making is a fundamental and important part of corporate finance.The “Pecking Order Theory” believes that when enterprises need funds,the preferred option should be endogenous financing.However,the traditional theory of capital structure is based on the assumptions of effective markets and rational man.In fact,business managers are by no means “completely rational” in making financing decisions.Therefore,with the rise of behavioral finance theory,scholars have also proposed many theories to study the influence of managerial psychological factors on corporate financing decisions.Among them,managers' overconfidence is one of the academic achievements of behavioral finance,which represents the optimistic attitude of senior executives on their own ability and the future of the enterprise.In theory,it will influence certain financing decisions and even corporate performance.Based on the above capital structure theory and behavioral finance theory,this paper explores the applicability of these two theories in China through the study of representative Chinese SME board listed companies.Explore the relationship between endogenous financing,managers' overconfidence and corporate performance.This paper selects the panel data of China's SME board listed companies from 2013 to 2017 for empirical research.The research results show that in China's SME board listed enterprises,the internal financing cash flow has a significant positive impact on the corporate performance,and the internal financing rate has no significant positive impact on the business performance;Managers' overconfidence has no significant impact on the internal financing cash flow.Managers' overconfidence has a significant positive impact on the internal financing rate;Managers' overconfidence has a significant positive impact on corporate performance.Finally,the article puts forward suggestions.For companies,especially SME board listed companies,enterprises should pay attention to the internal financing cash flow.They should reasonably analyze their financing needs and financial status,and pay attention to the use of internal financing funds instead of blindly pursuing external financing.At the same time,companies should also pay attention to their own operational capabilities and profitability,and accumulate internal financing funds to achieve sustainable corporate development.In terms of managers,companies can enhance managers' self-confidence through better incentives and attention to managers,improve the emphasis on internal financing,and improve corporate performance.