The Effect Of Managerial Overconfidence On Leverage

Hyunseok Kim

23 citations0/0 files storedInternational Business & Economics Research Journal (IBER)

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Corporate Finance and Governance Auditing, Earnings Management, Governance Corporate Insolvency and Governance

Abstract

In this paper, we examine the relationship between managerial overconfidence and leverage. Analyzing a sample of firms listed on Korean Stock Market during the period from 1985 to 2007, we use the average of the past 12 months Business Survey Index (BSI) from Bank of Korea as proxy measure of managerial overconfidence. We find that managers tend to issue more debts when they have overconfidence and this result is consistent with Oliver (2009) and Yu et al. (2006).

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1984Corporate financing and investment decisions when firms have information that investors do not have 1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1958The Cost of Capital, Corporation Finance and the Theory of Investment 2008The cost of capital, corporation finance and the theory of investment 1984Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have 1995What Do We Know about Capital Structure? Some Evidence from International Data 1988The Determinants of Capital Structure Choice

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