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Managerial overconfidence and debt maturity structure of firms

Author

Listed:
  • Jiang Wei
  • Xiao Min
  • You Jiaxing

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.

Suggested Citation

  • Jiang Wei & Xiao Min & You Jiaxing, 2011. "Managerial overconfidence and debt maturity structure of firms," China Finance Review International, Emerald Group Publishing Limited, vol. 1(3), pages 262-279, July.
    • Handle: RePEc:eme:cfripp:v:1:y:2011:i:3:p:262-279
    DOI: 10.1108/20441391111144112
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    References listed on IDEAS

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    Cited by:

    1. Hardeep Singh Mundi, 2023. "Impact of CEO Overconfidence on Capital Structure Decisions: Evidence from S&P BSE 200," Vision, , vol. 27(1), pages 63-78, February.
    2. Ooi, Chai-Aun & Hooy, Chee-Wooi, 2022. "Muslim CEOs, risk-taking and firm performance," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    3. Imen Tebourbi & Irene Wei Kiong Ting & Hanh Thi My Le & Qian Long Kweh, 2020. "R&D investment and future firm performance: The role of managerial overconfidence and government ownership," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1269-1281, October.
    4. McGuinness, Paul B., 2021. "Board member age, stock seasoning and the evolution of capital structure in Chinese firms," International Business Review, Elsevier, vol. 30(3).

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