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

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Author Info

  • Jiang Wei
  • Xiao Min
  • You Jiaxing
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    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.

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    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal China Finance Review International.

    Volume (Year): 1 (2011)
    Issue (Month): 3 (June)
    Pages: 262-279

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    Handle: RePEc:eme:cfripp:v:1:y:2011:i:3:p:262-279

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    Related research

    Keywords: Asset match; China; Debt maturity structure; Liquidity risk; Managerial overconfidence; Risk analysis;

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    References

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    1. Barclay, Michael J & Smith, Clifford W, Jr, 1995. " The Maturity Structure of Corporate Debt," Journal of Finance, American Finance Association, vol. 50(2), pages 609-31, June.
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    12. Ulrike Malmendier & Geoffrey Tate, 2004. "CEO Overconfidence and Corporate Investment," NBER Working Papers 10807, National Bureau of Economic Research, Inc.
    13. Diamond, Douglas W, 1991. "Debt Maturity Structure and Liquidity Risk," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 709-37, August.
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