Managerial Overconfidence: Evidence of Impact on the Company's Activities

Mahmoud Lari Dashtbayaz, Shaban Mohammadi


Overconfidence, one of the most important findings in the field of psychology of judgment and decision-making. Psychologists have found that people's ability to do their job properly, excessive estimate and the estimate is too important a person to duties of care, there is a direct relationship. The psychologists found that people in decision-making and judgment, to highlight the information, the more weight. The effects of overconfidence managers Company's procedures, including accounting policies, it is important that overconfidence can lead to incorrect decisions and inappropriate policies on investment, finance or accounting result and costs heavy impose on companies. Overconfidence is one of the most important managers' personality traits that influence risk-taking. If the auditor determines the character management and financial reporting risks because of overconfidence, over-estimated, it can claim a right to more trouble and his action to reduce the risk of detection is complete. On the other hand, because managers have more confidence in the financial reporting process to ensure companies attempt through negotiation, the scope of the audit procedures and the right to pay less hassle. In this study, the concept of overconfidence management, and then we speak of it. The effect on risk-taking experience, overconfidence and herding behavior management investment companies to examine. The relationship between management and income smoothing pay more confidence. And at the end of the impact of overconfidence management benefits as well as its relation with sensitivity equal division of investment cash flows examined.

Keywords: Overconfidence management, risk, smoothing, dividends, cash flow sensitivity of investment.

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