Managerial Optimism and Corporate Decisions
Date Issued
2005
Date
2005
Author(s)
Lin, Yueh-hsiang
DOI
en-US
Abstract
In this research we aim to explore the impact of managerial optimism on corporate policies. In the first chapter we examine the relation between managerial optimism and corporate investment decisions. Analyzing a sample of listed companies in Taiwan, we propose a measure of managerial optimism from management earnings forecasts, and find that in more financing constrained firms, optimistic managers exhibit higher investment-cash flow sensitivity than do non-optimistic managers.
In the second chapter we investigate the relation between managerial optimism and corporate financing decisions by empirically testing Heaton’s (2002) model. Heaton’s model gives a prediction that compared to non-optimistic managers, optimistic managers will issue more debt first when internal funds are insufficient and then pay down more debt once internal funds are ample. Therefore, the sensitivities between debt issues and internal funds are larger for optimistic managers than those for non-optimistic managers. Using a specification similar to that of Shaym-Sunder and Myers (1999), we find that in Taiwanese companies, optimistic Chief Executive Officers (CEOs) place more reliance on debt financing than do non-optimistic ones. The findings are consistent with the prediction of Heaton’s model.
Subjects
管理者盈餘預測
融資限制
融資決策
投資決策
管理者過度樂觀
Managerial optimism
Investment
Management earnings forecasts
Financing constraints
Type
thesis
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