IDEAS home Printed from https://ideas.repec.org/a/umk/journl/v8y2016i3p85-104.html
   My bibliography  Save this article

Impact of Managerial Overconfidence and Government Intervention on Firm Leverage DecisionL A MARS Model Approach

Author

Listed:
  • Irene Wei Kiong Ting

    (Department of Finance and Economics, College of Business Management and Accounting, Universiti Tenaga Nasional, Sultan Haji Ahmad Shah Campus)

  • Hooi Hooi Lean

    (Economics Program, School of Social Sciences, Universiti Sains Malaysia)

  • Qian Long Kweh

    (Department of Accounting, College of Business Management and Accounting, Universiti Tenaga Nasional, Sultan Haji Ahmad Shah Campus)

  • Noor Azlinna Azizan

    (Faculty of Technology, Universiti Malaysia Pahang)

Abstract

This paper investigates the impact of managerial overconfidence and government intervention on a firm’s leverage decision. The Motivation, Ability, Roles and Situation Factors (MARS) model is employed to examine its impact on leverage decision. Dynamic panel models are applied to examine the relationship between managerial overconfidence, government intervention and leverage decision of publicly listed companies in Malaysia for the period 2004-2013. The findings are as follows. (1) When CEOs are motivated, their overconfidence is significantly and positively related to debt; (2) The CEOs’ ability is significantly and positively related to leverage decision; (3) The CEOs’ role is significantly and negatively related to leverage decision. (4) Government ownership moderates the relationship between managerial overconfidence and firm leverage decision. (5) Malaysian public listed firms adjust debt towards an optimal level and the speed of adjustment is approximately 21% to 26% per annum. The findings a so pave the way for further study of antecedent conditions in predicting the extent of firm leverage decision from the behavioural perspective.

Suggested Citation

  • Irene Wei Kiong Ting & Hooi Hooi Lean & Qian Long Kweh & Noor Azlinna Azizan, 2016. "Impact of Managerial Overconfidence and Government Intervention on Firm Leverage DecisionL A MARS Model Approach," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 8(3), pages 85-104, July.
    • Handle: RePEc:umk:journl:v:8:y:2016:i:3:p:85-104
    as

    Download full text from publisher

    File URL: http://ijie.um.edu.my/filebank/published_article/10053/Impact%20of%20Managerial%20Overconfidence%20and%20Government%20Intervention%20on%20Firm%20Leverage%20Decision-A%20MARS%20Model%20Approach.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Dynamic Panel Model; leverage decision; MARS model; overconfidence;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:umk:journl:v:8:y:2016:i:3:p:85-104. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Teoh Wern Jun (email available below). General contact details of provider: https://edirc.repec.org/data/feaummy.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.