Managerial overconfidence and corporate investment decisions - Research based on Chinese listed companies
Managerial overconfidence refers to a manager’s strong belief in their management ability, their ability to choose better investment opportunities, and the richness of their perceived knowledge level. That is, overconfident managers consistently assess opportunities as being of higher value than the actual situation because of managerial psychological bias, commonly referred to as managerial overconfidence. This thesis uses Overconfidence Theory to study the investment decision-making of Listed Companies in China.The analysis looks at the M&A events in the A-share market of Shanghai and Shenzhen Stock Exchanges from January 1, 2012 to December 31, 2013 to investigate the behavior of managerial investment choices. The results show that, consistent with the theory of managerial overconfidence, overconfident Chinese managers demonstrate a positive association with the scale of investment and level of corporate overinvestment. In particular, the evidence suggests that firms with higher free cash flows and overconfident managers are associated with significantly higher levels of investment activity.
Advisor: Roberts, Helen; Tan, Eric; He, Ren
Degree Name: Doctor of Business Administration
Degree Discipline: Accountancy and Finance
Publisher: University of Otago
Keywords: Overconfidence of managers; Investment decision-making; Overinvestment; Cash flow
Research Type: Thesis