Managers' Overconfidence, Risk Preference, Herd Behavior and Non-efficient Investment

Main Article Content

Huang Yi
Yang Xiugang

Abstract

With the bounded rationality hypothesis, the psychological deviation of managers often leads to non-efficient investment decision-making practices. The study examines the impact of manager’s overconfidence, risk-preference and herd behavior on non-efficient investment using the Chinese A-shares listed company data as the research object, and finds that: (1) managers’ overconfidence and herd behavior would lead to more non-efficient investment in Chinese listed companies; and (2) managers’ risk preference restrains the increase of non-efficient investment to some extent. Meanwhile, the influence of the manager’s psychological deviation on the actual investment decision is a complicated process and can have a comprehensive effect resulted from the interaction of the above psychological biases, we also find that (3) managers' overconfidence is an interactive term in the effects of herd behavior and risk preference on non-efficient investment. That is, managers’ overconfidence can significantly reduce the positive effect of herd behavior on non-efficient investment; and can also significantly relieve the inhibition effect of risk preference on non-efficient investment. These findings reveal that it is important to understand managers’ irrational behaviors in enterprise investment decision-makings.

Article Details

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Articles
Author Biographies

Huang Yi, no 1. the business administration at the China-ASEAN International College, Dhurakij Pundit University,Thailand no 2. the college of economics and management, Shandong Yingcai University, China

Mrs. Huangyi is a doctoral candidate at the business administration at the China-ASEAN International College, Dhurakij Pundit University, and she also is a professor, a senior accountant and a head of financial management at Shandong Yingcai University. Her research concerns the financial management and the corporate governance. Her research has attracted many scholars ' attention in Chinese core periodicals such as the journal of Accounting Monthly, Accounting Newsletter, Wuhan Finance and so on.

Yang Xiugang, the business administration at the China-ASEAN International College Dhurakij Pundit University, Thailand

Yang Xiugang is a doctoral supervisor at the business administration at the China-ASEAN International College, Dhurakij Pundit University.

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