TITLE:
Executive Equity Incentives, Overconfidence and Corporate Inefficient Investment
AUTHORS:
Sisi Xiong
KEYWORDS:
Executive Equity Incentives, Executive Overconfidence, Non-Efficiency Investment, Masking Effect
JOURNAL NAME:
Open Journal of Business and Management,
Vol.7 No.1,
January
11,
2019
ABSTRACT: In the past research on equity incentives, the influence of incentive system on individual psychological factors was often neglected. From the perspective of behavioral company finance, this paper takes executives from 2010 to 2016 China A-share listed companies as research samples to research framework for overconfidence, executive equity incentives, and corporate inefficient in-vestment. The results of the study show that equity incentives can alleviate the underinvestment behavior of executives by influencing executives’ over-confidence, and executive overconfidence is partly a sub-mediating effect. However, for over-invested enterprises, the indirect effect of executive over-confidence generated by equity incentives on corporate over-investment is a deterioration, and the direct effect of equity incentives is opposite to the indirect effect. So executives’ overconfidence in equity incentives, in the ex-cessive investment of enterprises, plays a special mediating effect—the cover effect.