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Managerial overconfidence and debt maturity structure of firms Analysis based on China's listed companies

Managerial overconfidence and debt maturity structure of firms Analysis based on China's listed... Purpose – The purpose of this paper is to empirically analyze the effects of managerial overconfidence on debt maturity structure decisions in terms of liquidity risk and asset match in Chinese listed companies. Design/methodology/approach – Combining data from CSMAR with some default data collected by hand, this paper selects age, tenure, education, education background and whether the board chair and CEO positions are consolidated in Chinese listed companies as proxies of managerial overconfidence. Thus, the authors acquired needed and credible empirical data. Findings – It was found that, the younger the CEO, the shorter the tenure, the lower the education, having economics or management education and being chairman concurrently, CEOs have stronger managerial overconfidence. Thus, corporate debt maturity structure is more weakly correlated with debt ratio and asset structure. Research limitations/implications – The findings in this study suggest that managerial irrationality, especially overconfidence, does have an effect on the financing decisions of firms. Originality/value – This is the first paper to analyze the effects of managerial overconfidence on debt maturity structure decisions in terms of liquidity risk and asset match. The findings inspire firm risk management policies from managerial overconfidence. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png China Finance Review International Emerald Publishing

Managerial overconfidence and debt maturity structure of firms Analysis based on China's listed companies

Jiang Wei; Xiao Min; You Jiaxing
China Finance Review International , Volume 1 (3): 18 – Jul 1, 2011
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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
2044-1398
DOI
10.1108/20441391111144112
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to empirically analyze the effects of managerial overconfidence on debt maturity structure decisions in terms of liquidity risk and asset match in Chinese listed companies. Design/methodology/approach – Combining data from CSMAR with some default data collected by hand, this paper selects age, tenure, education, education background and whether the board chair and CEO positions are consolidated in Chinese listed companies as proxies of managerial overconfidence. Thus, the authors acquired needed and credible empirical data. Findings – It was found that, the younger the CEO, the shorter the tenure, the lower the education, having economics or management education and being chairman concurrently, CEOs have stronger managerial overconfidence. Thus, corporate debt maturity structure is more weakly correlated with debt ratio and asset structure. Research limitations/implications – The findings in this study suggest that managerial irrationality, especially overconfidence, does have an effect on the financing decisions of firms. Originality/value – This is the first paper to analyze the effects of managerial overconfidence on debt maturity structure decisions in terms of liquidity risk and asset match. The findings inspire firm risk management policies from managerial overconfidence.

Journal

China Finance Review International – Emerald Publishing

Published: Jul 1, 2011

Keywords: China; Managerial overconfidence; Debt maturity structure; Liquidity risk; Asset match; Risk analysis

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