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Study on the Mechanism of How Managers’ Psychological Biases Cause Corporate Irrational Investment

Author: ShengHu
Tutor: RaoYuLei
School: Central South University
Course: Management Science and Engineering
Keywords: Managers Psychological bias Irrational investment Behavioral cost
CLC: F272
Type: PhD thesis
Year: 2010
Downloads: 284
Quote: 1
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Abstract


Business investment is to achieve economic growth and improve people's quality of life, the origin, as well as the creation of shareholder value, but in real life, but there are a large number of inefficient investment behavior to form a waste of social resources. Based on the assumption of \The research has important significance. The article discusses the influence of senior managers in corporate investment decisions, and analysis of the psychological process of business investment, based on analysis of the mechanism of psychological deviation of the managers irrational investment: Managers' overconfidence and based on pay comparison jealousies own capacity, resulting in excessive investment behavior; the shortsighted deviation based on the limited attention from managers, saving the cost of information gathering and shirk their responsibilities need to produce a herd mentality, leading enterprises The disorderly diversified investment; managers confirmed deviation, loss aversion and regret aversion and other psychological characteristics lead to business losses projects Escalation. Such investment may ultimately enable enterprises to the loss of core competitiveness, plunged into financial crisis and management chaos, irrational investment called the behavior of the cost of damage to the enterprise value. Psychological bias and irrational investment managers of the measure on the existing research results, analysis and evaluation, and pointed out its shortcomings. News Analysis rule deviation from the manager psychological measure, the method has certain advantages. News analysis method, measure of overconfidence managers to enhance the hot news attention analysis methods to measure short-sighted managers change the consistency of certain groups of news attention, measure the herd behavior of managers . The same time, for the managers psychological deviation caused by the irrational investment behavior, the appropriate way to measure and judgment. And listed companies in New Hope and its team of managers on behalf of Mr Liu as a case study, the analysis and validation of these methods. To use the monkey king psychological and equity theory, defined by the the external remuneration comparisons manager Jealousy, and China's SME board listed company data, empirical study found that managers pay gap jealousies enterprise investments significant positive effect, and these investments is no corporate financial support irrational investment. In order to explain the relationship between executive compensation contests and business investment competition. For the corporate stock investment boom in China's capital market irrational exuberance, research, analysis found that the managers of the limited attention and short-sightedness of investors will lead to short-sighted, the more short-sighted managers, resulting in a the manufacturing class manufacturing listed company More stock investment. Disorderly diversified investment of Chinese enterprises formed to chase the hot market construed accordingly. In order to reduce the deviation of managers psychological impact on business investment, we should improve the quality of managers a reasonable external system design as well as the perfect financial markets point of view, to suppress the irrational behavior of managers on corporate investment decisions.

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CLC: > Economic > Economic planning and management > Enterprise economy > Enterprise planning and management decision - making
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