管理者过度自信、自由现金流与上市公司多元化

Managerial Overconfidence, Free Cash Flow and Diversification of Listed Companies

本文放宽了传统的公司多元化动机理论的决策者理性假设,从行为金融学和自由现金流视角,以我国沪深两市2007-2010年间的上市公司为样本,研究了管理者过度自信、自由现金流以及两者的交互效应对于上市公司多元化的影响。本文的研究结论表明:管理者过度自信促进了上市公司的多元化;丰富的自由现金流对上市公司多元化有显著的正向影响;当公司自由现金流充裕时,与管理者非过度自信的公司相比,管理者过度自信的公司的多元化水平更高。

With the rapid development of Chinese economy, Chinese firms are eager to grow bigger and stronger. An increasing number of companies are utilizing diversification strategy in order to achieve these objectives in short time. However, recent studies have shown that diversification cost has exceeded the total benefit. Those studies labeled it as diversification discount phenomenon. Many theories, such as resource-based theory, transaction cost theory, and agency theory, have been used to explain corporate decision for adopting diversification strategy. Although these studies found that diversification strategy is a rationale decision, they ignored the impact of the irrational activity （e.g. manager＇s overconfidence and ignorance of initial motivation of managers） of managers on corporate diversification strategies. Lee and Yates＇ （1995） cross-cultural study finds that Chinese are more confident than Americans. This study adopts the perspective of behavior finance and free cash flow theory, and relaxes previous hypothesis that most managers are rationale. The sample of the listed companies of Shanghai and Shenzhen between 2007 and 2010 in China was used to examine the effect of managerial overconfidence on the diversification of the listed companies, shed new insights into enterprise diversification strategy, and expand corporate diversified motivation theory. We also investigated the impact of free cash flow on enterprise diversification, and further tested the impact of the interaction between managerial overconfidence and free cash flow on enterprise diversification. The results show that： First, there is a significantly positive relationship between managerial overconfidence and the level of enterprise diversification. For enterprises in emerging economies, managers are more likely to be overconfident due to Chinese traditional culture. There is one overconfident manager out of three managers in our sample. Hence, the empirical results show that overconfident managers tend to underestimate the risk of diversification and overestimate the return and their control abilities. As a result, they adopt the diversification decision to satisfy the desire to make firms become larger and stronger. This finding is consistent with the conclusion of Jiang＇s study that overconfident managers will use internal investment and external acquisition to expand firms and improve diversification level. Second, the more the free cash flow the higher the level of enterprise diversification. Under the inadequate regulation environment combined with imperfect manager market in China, the lack of restrictions on managers can lead to the expansion of manager control. When firms have abundant free cash flow, manager will use it to implement diversification strategy without paying dividends to shareholders. Third, in firms with abundant free cash flow the level of diversification in firms with overconfident managers is higher than firms with non-overconfident managers. In firms with abundant flee cash flow, managers are more likely to feel that they have control and tend to overestimate the return of diversification and underestimate the risk and cost. Therefore, managers＇ idea to implement diversification is improved by the abundant free cash flow. As a result, managers will participate in more diversified business using the excess fund.