The Influence of CEO`s Overconfidence on Investment Sensitivity to Cash Flow

Student: Bykova Marina

Educational Programme: Economics (Bachelor)

Year of Graduation: 2018

This paper examines the influence of the company's top management overconfidence on the investment-cash flow sensitivity (ICS) on the Russian market. We also consider the possible asymmetry of ICS, depending on which direction the company's cash flows change (positive or negative). In addition, we investigate the effect self-attribution bias (self-identification of an individual based on a successful past experience), on overconfidence in management and, as a consequence, on ICS. Our study confirms the fact that managerial overconfidence increases the investment-cash flow sensitivity, and we have also identified the asymmetry inherent in ICS, but we find a weak relationship between asymmetry and management overconfidence, and only in case when managerial overconfidence is strengthened by self-attribution bias.

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