Will Management Emotion Affect the Maturity Structure of Corporate Debt?

Guo-Tong Wu

doi:10.7176/rjfa/10-16-15

Abstract

Based on behavioral finance theory, this paper takes 22186 observation samples of China's Shanghai and shenzhen a-shares from 2007 to 2017 as research objects, try to measure the degree of over-optimistic of management by analyzing the tone of listed companies' annual reports, on this basis, the influence mechanism of over-optimistic of management on corporate debt financing decisions is investigated, and the heterogeneity is analyzed from the property right nature, financing constraints and economic policy uncertainty. The research results show that: First, the Python language analysis module is used to analyze the management intonation vocabulary in the annual report, and to build a linear model of the management intonation with the actual business operation and future prospects of the enterprise, take the residual error of the linear model as the proxy variable of over-optimistic of the management, this provides a reliable measurement method for the subsequent theoretical research on over-optimistic of management; Secondly, over-optimistic of the management will lead to larger scale of new debt financing and longer debt maturity structure, which is still true after controlling endogenous problems; Third, when property rights are non-state-owned enterprises, financing constraints are more serious and economic policy uncertainties are higher, excessive optimism of management has a more significant impact on corporate debt financing. From the perspective of behavioral finance, this paper examines the influence of over-optimistic of management on corporate debt financing decisions, enriches the relevant theoretical literature on the influencing factors of corporate debt financing, and has positive significance for comprehensively understanding the decision-making process of corporate debt financing. Keywords: Over-optimistic ; Debt Financing; Debt Maturity Structure DOI : 10.7176/RJFA/10-16-15 Publication date : August 31 st 2019

Highlights

Stemed from psychology, over-optimistic means overestimating the possibility of better future prospects and underestimating the possibility of worse
From the perspective of management optimism, we examine the influence of over-optimistic of management on corporate debt financing decisions and further enrich the relevant theoretical literature about the impact of management traits on the decisions of enterprise operation
Our results suggest that: over-optimistic of the management will lead to longer debt maturity structure, which is still true after controlling endogenous problems

Summary

Introduction

Stemed from psychology, over-optimistic means overestimating the possibility of better future prospects and underestimating the possibility of worse. The excessively optimistic managers often have more optimistic view about future prospects of enterprises, which will have an impact on corporate financing decisions. From the perspective of management optimism, we examine the influence of over-optimistic of management on corporate debt financing decisions and further enrich the relevant theoretical literature about the impact of management traits on the decisions of enterprise operation.

Results

Conclusion