Author(s)

Langlang Ye

Corresponding Author

Langlang Ye

ABSTRACT

In the actual business operation process, managers are often affected by various factors and do not meet the "rational economic man" assumption. Therefore, it is necessary to introduce managers' psychological characteristics into related research on corporate governance. Financial flexibility reflects the ability of an enterprise to obtain external financing in a timely manner to cope with difficulties and grasp development opportunities when facing financial difficulties or investment opportunities. This paper will start from the perspective of managerial irrationality, use the manager's earnings forecast deviation to measure managerial overconfidence and use the financial flexibility index to measure the level of financial flexibility. Selecting the unbalanced panel data of Shanghai and Shenzhen listed A-share non-financial companies from 2015 to 2018, and using Excel and stata to make data processing and empirical analysis. This paper studys the influence of managers' overconfidence on the financial flexibility of enterprises. The conclusion is obtained: (1) Managers 'overconfidence is significantly negatively related to the level of corporate financial flexibility, that is, managers' overconfidence keeps lower level of financial flexibility. The samples are grouped and regressed to test the moderating effects of resources and market constraints on the relationship between managers' overconfidence and financial flexibility where the property rights and the degree of the competition are used to define resource constraints and market constraints. The conclusion shows that (2) compared with state-owned enterprises, the overconfidence of non-state-owned enterprise managers has a more significant negative impact on financial flexibility; (3) compared with non-competitive enterprises, the overconfidence of competitive industry managers has an more significant impact on financial flexibility.

KEYWORDS

Managerial Overconfidence, Financial Flexibility, Property, Rights, Market Competition