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The Influence of CEO Overconfidence on the Financial Policies of Russian Companies

Student: Shagimerdyanova Diana

Supervisor: Irina Ivashkovskaya

Faculty: Faculty of Economic Sciences

Educational Programme: Corporate Finance (Master)

Year of Graduation: 2019

The current study examines the influence of self-confidence and the power of the CEO on the financial policies of Russian companies. The study of anomalies in the behavior of the CEO, in particular his self-confidence, affecting the decisions made and the financial policy chosen by the corporation has become relevant over the past few decades, because the quality of these decisions has a significant impact on the financial performance of the corporation. The existing layer of research doesn’t cover the question of the influence of the CEO’s self-confidence on the financial decisions of Russian companies. This paper reveals the existence of this dependence and determines its nature, which varies depending on the type of policy. This paper analyzes a sample of Russian non-financial companies in the period from 2014 to 2017; regression analysis is used as a research tool. Analyzing the financing policy, it was revealed that companies with confident CEOs choose a higher level of debt burden; with regards to the investment policy - such companies are characterized by a large amount of investment and lower quality; for the policy of dividend payments, a decrease in the level of dividends is observed if the company is headed by a self-confident director. In conducting the study, a relative indicator of the number of references to the CEO in the press was used as a proxy of self-confidence. To reflect a more complete picture of the studied phenomenon, you can use additional methods for quantifying self-confidence, thereby strengthening the accuracy of the parameter estimates in the paper.

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