The Effect of Managerial Overconfidence on Debt Maturity Structure in Listed Companies in Tehran Stock Exchange
Financing policies made by managers can play a key role in the risk and wealth creation for stochkholders. However, identifying effective factors in managers` financing decisions is of great importance. Overconfidence is one of the most important personality traits of managers. Overconfidence is eff...
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| Format: | Article |
| Language: | fas |
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University of Isfahan
2018-04-01
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| Series: | Journal of Asset Management and Financing |
| Subjects: | |
| Online Access: | https://amf.ui.ac.ir/article_21350_f0ecf63962068eb840d3fe896c0a01e7.pdf |
| _version_ | 1818922154364764160 |
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| author | Masoud Hasani Alghar Nezamoddin Rahimian |
| author_facet | Masoud Hasani Alghar Nezamoddin Rahimian |
| author_sort | Masoud Hasani Alghar |
| collection | DOAJ |
| description | Financing policies made by managers can play a key role in the risk and wealth creation for stochkholders. However, identifying effective factors in managers` financing decisions is of great importance. Overconfidence is one of the most important personality traits of managers. Overconfidence is effective in risk taking. Overconfident managers overestimate future returns of business projects due to false confidence. Therefore, they might overestimate the likelihood and impact of positive shocks of future cash flows for these projects. Meanwhile, they may underestimate the negative shocks. They believe that their business entities have been undervalued in the capital market and can choose shorter maturity debt and increase shareholder wealth. They prefer to issue bonds rather than stocks. This study aims to examine the effect of a psychological factor (managerial overconfidence) on debt maturity structure. The sample consisted of selected companies listed in Tehran Stock Exchange from 2007 to 2014. Two scales which are based on managers` bias to forecast earnings and investment decisions are employed to measure the managerial overconfidence. The results show that managerial overconfidence has a positive and significant effect on debt maturity structure. Overconfident managers take shorter debt maturity structure by applying higher percentage of short-term debt. Liquidity risk related to this financing policy would not prevent them from such behavior. |
| first_indexed | 2024-12-20T01:49:02Z |
| format | Article |
| id | doaj.art-93ac9c734b9344a1bb463a16c6719938 |
| institution | Directory Open Access Journal |
| issn | 2383-1189 2383-1189 |
| language | fas |
| last_indexed | 2024-12-20T01:49:02Z |
| publishDate | 2018-04-01 |
| publisher | University of Isfahan |
| record_format | Article |
| series | Journal of Asset Management and Financing |
| spelling | doaj.art-93ac9c734b9344a1bb463a16c67199382022-12-21T19:57:40ZfasUniversity of IsfahanJournal of Asset Management and Financing2383-11892383-11892018-04-01618910610.22108/amf.2017.2135021350The Effect of Managerial Overconfidence on Debt Maturity Structure in Listed Companies in Tehran Stock ExchangeMasoud Hasani Alghar0Nezamoddin Rahimian1- Instructor,Accounting Department, Faculty Humanities, Bozorgmehr University of Qaenat, Qaen, IranAssistant Professor, Auditing Department, Faculty Humanities, Khatam University, Tehran, IranFinancing policies made by managers can play a key role in the risk and wealth creation for stochkholders. However, identifying effective factors in managers` financing decisions is of great importance. Overconfidence is one of the most important personality traits of managers. Overconfidence is effective in risk taking. Overconfident managers overestimate future returns of business projects due to false confidence. Therefore, they might overestimate the likelihood and impact of positive shocks of future cash flows for these projects. Meanwhile, they may underestimate the negative shocks. They believe that their business entities have been undervalued in the capital market and can choose shorter maturity debt and increase shareholder wealth. They prefer to issue bonds rather than stocks. This study aims to examine the effect of a psychological factor (managerial overconfidence) on debt maturity structure. The sample consisted of selected companies listed in Tehran Stock Exchange from 2007 to 2014. Two scales which are based on managers` bias to forecast earnings and investment decisions are employed to measure the managerial overconfidence. The results show that managerial overconfidence has a positive and significant effect on debt maturity structure. Overconfident managers take shorter debt maturity structure by applying higher percentage of short-term debt. Liquidity risk related to this financing policy would not prevent them from such behavior.https://amf.ui.ac.ir/article_21350_f0ecf63962068eb840d3fe896c0a01e7.pdfmanagerial overconfidencedebt maturity structureliquidity riskmispricing |
| spellingShingle | Masoud Hasani Alghar Nezamoddin Rahimian The Effect of Managerial Overconfidence on Debt Maturity Structure in Listed Companies in Tehran Stock Exchange Journal of Asset Management and Financing managerial overconfidence debt maturity structure liquidity risk mispricing |
| title | The Effect of Managerial Overconfidence on Debt Maturity Structure in Listed Companies in Tehran Stock Exchange |
| title_full | The Effect of Managerial Overconfidence on Debt Maturity Structure in Listed Companies in Tehran Stock Exchange |
| title_fullStr | The Effect of Managerial Overconfidence on Debt Maturity Structure in Listed Companies in Tehran Stock Exchange |
| title_full_unstemmed | The Effect of Managerial Overconfidence on Debt Maturity Structure in Listed Companies in Tehran Stock Exchange |
| title_short | The Effect of Managerial Overconfidence on Debt Maturity Structure in Listed Companies in Tehran Stock Exchange |
| title_sort | effect of managerial overconfidence on debt maturity structure in listed companies in tehran stock exchange |
| topic | managerial overconfidence debt maturity structure liquidity risk mispricing |
| url | https://amf.ui.ac.ir/article_21350_f0ecf63962068eb840d3fe896c0a01e7.pdf |
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