Studies on the Connection between CEO Overconfidence and Business Investment Financing Practices
Keywords:
CEO; Overconfidence; Enterprise ManagementAbstract
Various behavioral views of business leaders in the real decision-making of corporate finance
currently pose a challenge to the traditional corporate finance theory. This study examines the connection
between CEO overconfidence and business operations using data from A-share listed businesses on the Shanghai
and Shenzhen stock exchanges in China from 2003 to 2016 from the standpoint of behavioral finance. According
to the study, CEOs that are overconfident will typically raise leverage and loan volume, particularly short-term
loans; The CEO of a listed business is more likely to be overconfident when economic growth is faster; yet,
contrary to the findings of international studies, overconfident corporations did not replace CEOs more
frequently than non-overconfident companies, nor did they raise the likelihood of bankruptcy. Lastly, it doesn't
seem like the CEO of a state-owned business is more arrogant than the CEO of a private business.