DID MANAGER BEHAVE OVERCONFIDENTLY?

Bayu Sindhu Raharja, Dahli Suhaeli and Muji Mranani
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Bayu Sindhu Raharja: Department of Management, The Faculty of Economics and Business, Universitas Muhammadiyah Magelang, Indonesia
Dahli Suhaeli: Department of Management, The Faculty of Economics and Business, Universitas Muhammdiyah Magelang, Indonesia
Muji Mranani: Department of Accounting, The Faculty of Economics and Business, Universitas Muhammadiyah Magelang, Indonesia

Studii Financiare (Financial Studies), 2017, vol. 21, issue 3, 32-44

Abstract: This research examines the hypothesis of manager overconfident on financing decision. According to previous research, the manager of higher growth firms tends to have overconfidence to use higher financial leverage on their financing decision, that causes the declining of its performance in the future. The empirical results of this research show that higher growth tends to have higher financial leverage and reduced performance in the future. Nevertheless, higher financial leverage on higher growth is not implied overconfident behavior. Instead, higher financial leverage is a rational decision on financing higher growth firms. This research also gives a different evidence of the firms’ financing behavior in Indonesia. This evidence shows that employing higher financial leverage to proof the hypothesis of manager overconfident is appropriately used on firms which have weak growth.

Keywords: Sales growth; Debt; Financial leverage; Long-term performance (search for similar items in EconPapers)
JEL-codes: G0 G1 G3 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:vls:finstu:v:21:y:2017:i:3:p:32-44

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