CEO Overconfidence and Distortions of Firms Investment: Some Empirical Evidence from China
In this study,we argue that managerial overconfidence can account for corporate investment distortions.Overconfident managers overestimate the returns to their investment projects,which induce they to over-invest when firms have abundant funds.We test these predictions using a sample of Chinese listed companies between 2003 and 2004.We identify CEOs as overconfident when they purchase additional company stock despite their already high exposure to company risk.Based on their characteristics and special institutional background in Chinese stock market,we find that overconfident CEOs have a higher sensitivity of corporate investment to cash flow from equity financing than that of free cash flow from operation.Overconfident managers over-invest when firms have abundant funds from equity financing,but curtail investment when firms are short of cash flow from equity financing,which is unique with prior researches where samples of west countries are used.
Over-investment Overconfidence Cash flow from equity financing Free cash flow
WANG Xia ZHANG Min
School of Business,Renmin University of China,P.R.China,100872
国际会议
2007 International Conference on Management Science and Engineering(2007管理科学与工程国际学术会议)
河南焦作
英文
996-1003
2007-08-20（万方平台首次上网日期，不代表论文的发表时间）