Abstract
At present, the classic corporate finance theory is challenged by various behavioral visions of corporate leaders in the actual decision-making of corporate finance. From the perspective of behavioral finance, this paper selects the data of A-share listed companies in China's Shanghai Stock Exchange and Shenzhen Stock Exchange in 2003-2016 to study the relationship between CEO's overconfidence and business operations. The study found that: Overconfidence CEOs will tend to increase the level of leverage, increase the number of loans, especially to increase the number of short-term loans; When the economic growth is faster, the listed company's CEO is more inclined to overconfidence; However, unlike the results of foreign studies, overconfident companies did not replace CEOs more frequently than non-overconfident companies, and did not increase the probability of bankruptcy. Finally, the CEO of a state-owned company does not appear to be more overconfident than the CEO of a private company.
Highlights
A large number of studies have shown that CEO's overconfidence has a major impact on the company's investment and financing decisions, company performance, and future development direction
Does an overconfident CEO have any advantages or disadvantages for company development? Since ROLL introduced this concept of overconfidence into the field of management for the first time in 1986, it has inspired scholars' enthusiasm
Studies consistently agreed that managers generally have overconfidence, and overconfidence managers are prone to decision-making biases, which in turn threaten the healthy development of the company
Summary
A large number of studies have shown that CEO's overconfidence has a major impact on the company's investment and financing decisions, company performance, and future development direction. Does an overconfident CEO have any advantages or disadvantages for company development? Since ROLL introduced this concept of overconfidence into the field of management for the first time in 1986, it has inspired scholars' enthusiasm. Overconfident managers tend to conduct M&A activities that reduce the value of the company and tend to overinvest or underinvest. It is of utmost importance to study how CEO's overconfidence will affect the company. This article draws lessons from the research results of domestic and foreign scholars, using actual data to examine the relationship between CEO overconfidence and investment behavior and its impact on business performance
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