경영자 과신성향과 기업의 현금보유 = The Effect of Managerial Overconfidence on Corporate Cash Holdings

다국어 초록 (Multilingual Abstract)

CEO overconfidence represents a CEO’s attitude toward risk-taking and future payoff. Overconfident CEO is likely to overestimate the payoffs of their investment projects and underestimate the risk. As a results, they tend to overinvest and require more fund.
The financial literature indicates that cash holdings are determined by the incentives based on trade-off theory and agency problems. In this paper, we study cash holdings from the perspective of trade-off theory which implies that firms accumulate cash for the transaction and precautionary motives.
Covering a Korean sample 11,512 firm-year observation between 2002 and 2022, we examine the effect of CEO overconfidence on cash holdings using the models of Opler et al.(1999) and Chen et al. (2020). We find a significantly positive of CEO overconfidence on cash holdings. This indicates that overconfident CEO have higher motive to maintain higher level of cash for future investments.
Additionally we investigate whether foreign shareholders ratio and hightech industry affect the positive relation between overconfidence and cash holdings. We find that these effect is pronounced in firms with lower foreign shareholder ratio and in high-tech industries. Further we examine the effect of each component of CEO overconfidence on cash holdings and decompose the effect of investment and financial motives of overconfidence.