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Managerial overconfidence and over-investment: Empirical evidence from China


Based on data of A-shares listed companies in China, this paper studies the relationship between managerial overconfidence and firms’ overinvestment behaviors. We first define a manager as an overconfident one if his or her compan’s announced earnings forecast is higher than its actual earnings at least once in 2002–2004. After controlling such factors as growing opportunity, size, etc., we find that overconfident managers tend to over-invest and their overinvestment behaviors have higher sensitivity to cash flow generated by financing activities. In other word, when their firms obtain an abundant cash flow from financing activities, overconfident managers will over-invest, or vise versa. Contrary to other relevant studies, we find that the sensitivity between over-investment and free cash flow has little to do with managerial overconfidence. Robustness testing is conducted to verify the reliability of our conclusions. We also use “whether top managers increase their holdings of company shares within the observation period” as a substitute variable for managerial overconfidence and run the tests again, and the results are consistent with the above. Finally, findings of this paper indicate that it is necessary for firms to establish a scientific and rigorous investment managing mechanism.


以非金融类A 股上市公司为研究样本, 考察了管理者过度自信与企业投资行为的关系。 如果样本公司在2002–2004 期间内至少有一次发布的盈利预测值大于实际盈利, 我们就将该公司的管理者定义为过度自信的管理者。 控制了增长机会、 规模等因素后, 研究发现, 过度自信的管理者倾向于过度投资, 并对融资活动产生的现金流有更高的敏感性。 即当公司有充裕的融资活动现金流时, 过度自信的管理者会过度投资; 反之, 则投资不足。 还发现过度投资与经营活动产生的自由现金流之间的敏感性基本上不受管理者过度自信心理特征的影响, 这与其他一些研究的结论不一致。 此外, 我们以样本期间内管理者是否增持本公司的股票作为过度自信的替代变量重新进行了研究, 研究结论保持一致。 结论证明, 公司有必要建立科学、 严格的投资管理制度。


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Correspondence to Min Zhang.

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Translated and revised from Nankai Guanli Pinglun 南开管理评论 (Nankai Business Review), 2008, (2): 77–83

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Wang, X., Zhang, M. & Yu, F. Managerial overconfidence and over-investment: Empirical evidence from China. Front. Bus. Res. China 3, 453–469 (2009).

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  • over-investment
  • overconfidence
  • cash flow from financing activities
  • free cash flow


  • 过度投资
  • 过度自信
  • 融资现金流
  • 自由现金流