TITLE:
Can Overconfident Executives Restrain Overinvestment?
AUTHORS:
Xuanbing Liu
KEYWORDS:
Financing Ability, Overconfidence, Overinvestment
JOURNAL NAME:
Modern Economy,
Vol.8 No.8,
August
22,
2017
ABSTRACT: This paper uses the data of the public company from
2013 to 2015 to explore the relationship between executives’ overconfidence and
overinvestment when the company’s financing ability is different. Unlike
previous studies, the result of this study shows that overconfidence may curb
overinvestment when the company’s financing capacity is poor. It is when the
financing capacity is strong that overconfidence will exacerbate
overinvestment. A lot of studies show that overconfident executives increase
overinvestment because of underestimation of risk, and our study gives a
different view.