Managers’ Overconfidence And Corporate Cash Holding In China: The Interaction Effect Of Product Market Competition

• Main Author: Bo, Le
• Format: Thesis
• Language: English
• Published: 2024
• Subjects: HD28-70 Management. Industrial Management
• Online Access: http://eprints.usm.my/63613/

Traditional corporate finance theory holds that people are entirely rational. However, psychological research shows that people are not wholly rational, which means that when people make decisions, their beliefs and preferences usually produce systematic biases manifested by behavioural characteristics such as overconfidence and loss avoidance. The theory of behavioural corporate finance emerges gradually as psychological research findings are applied to corporate finance, loosening the assumption of a rational economic person. Managers serve as the power center of enterprise organisational leadership and must accept some responsibility for business operations, and their actions can have a significant impact on enterprise decisions. Managers' behaviours can be influenced to some extent by their psychological characteristics, implying that managers are not entirely rational. Thus, the main purpose of this study is to examine the relationship between managers' overconfidence and corporate cash holding decisions in chinese listed companies. This study also investigated the influence of product market competition on the relationship between managers' overconfidence and corporate cash-holding decisions. This study used the data of the a-share listed companies in shanghai and shenzhen from 2010-2022 as the sample and applied fem and generalized method of moments (gmm) for analyzing the data.