Managerial overconfidence and debt maturity structure of firms: Analysis based on China's listed companies

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.

Citation

Wei, J., Min, X. and Jiaxing, Y. (2011), "Managerial overconfidence and debt maturity structure of firms: Analysis based on China's listed companies", China Finance Review International, Vol. 1 No. 3, pp. 262-279. https://doi.org/10.1108/20441391111144112