Browse > Article
http://dx.doi.org/10.13106/jafeb.2020.vol7.no2.99

Influence of Overconfidence and Cash Flow on Investment in Vietnam  

NGUYEN, Duy Van (Quantitative Analysis Center, QA Global Co.)
DANG, Duong Quy (University of Economics and Business, Vietnam National University)
PHAM, Giang Hoang (Foreign Trade University)
DO, Du Kim (Thai Nguyen University of Economics and Business Administration)
Publication Information
The Journal of Asian Finance, Economics and Business / v.7, no.2, 2020 , pp. 99-106 More about this Journal
Abstract
CEOs Overconfidence can bring potentially risky early decisions to businesses, along with large enterprise free cash flow that can bring different investment decisions with CEOs Overconfidence. Especially in the context of Vietnamese enterprises, CEOs are often influenced by behavioral psychology about overconfidence in investment decisions (due to individual cultural characteristics as well as operating financial markets also depend on many factors outside the market). Therefore, the authors study the impact of overconfidence and cash flow on investment in Vietnamese to find the internal relationship between these three factors in the financial environment in Vietnam. With 480 companies listed on the Vietnam Stock Exchange from 2014 to 2018 (companies have continuous reports), the regression analysis results with panel data (FEM, GLS models, correction of robust and GMM dealing with endogenous problems) have shown Overconfidence has a positive impact on investment. At the same time, the results also indicated that enterprises with overconfident CEOs and large cash flows tend to invest less than enterprises with low cash flow. The results of this study have shown the behavioral behavior of CEOs in Vietnamese enterprises that exist under both prospect theory and effective market theory.
Keywords
Overconfidence; Cash Flow; Investment; Vietnam;
Citations & Related Records
연도 인용수 순위
  • Reference
1 Malmendier, U., & Tate, G. (2005b). Does Overconfidence Affect Corporate Investment? CEO Overconfidence Measures Revisited. European Financial Management, 11(5), 649-659. https://doi.org/10.1111/j.1354-7798.2005.00302.x   DOI
2 Malmendier, U., & Tate, G. (2008). Who makes acquisitions? CEO overconfidence and the market's reaction. Journal of Financial Economics, 89(1), 20-43. https://doi.org/10.1016/j.jfineco.2007.07.002   DOI
3 Pikulina, E., Renneboog, L., & Tobler, P. N. (2017). Overconfidence and investment: An experimental approach. Journal of Corporate Finance, 43, 175-192. https://doi.org/10.1016/j.jcorpfin.2017.01.002   DOI
4 Svenson, O. (1981). Are we all less risky and more skillful than our fellow drivers? Acta Psychologica, 47(2), 143-148. https://doi.org/10.1016/0001-6918(81)90005-6   DOI
5 Tobin, J. (1969). A General Equilibrium Approach To Monetary Theory. Journal of Money, Credit and Banking, 1(1), 15-29. https://doi.org/10.2307/1991374   DOI
6 Tversky, A., & Kahneman, D. (1974). Judgment under Uncertainty: Heuristics and Biases. Science, 185(4157), 1124-1131. https://doi.org/10.1126/science.185.4157.1124   DOI
7 Waweru, N. M., Munyoki, E., & Uliana, E. (2008). The effects of behavioural factors in investment decisionmaking: A survey of institutional investors operating at the Nairobi Stock Exchange. International Journal of Business and Emerging Markets, 1(1), 24-41. https://doi.org/10.1504/IJBEM.2008.019243   DOI
8 Hackbarth, D. (2008). Managerial Traits and Capital Structure Decisions. Journal of Financial and Quantitative Analysis, 43(4), 843-881. https://doi.org/10.1017/S002210900001437X   DOI
9 Gigerenzer, G., & Gaissmaier, W. (2011). Heuristic Decision Making. Annual Review of Psychology, 62(1), 451-482. https://doi.org/10.1146/annurev-psych-120709-145346   DOI
10 Goel, A. M., & Thakor, A. V. (2008). Overconfidence, CEO Selection, and Corporate Governance. The Journal of Finance, 63(6), 2737-2784. https://doi.org/10.1111/j.1540-6261.2008.01412.x   DOI
11 Hausman, J. A. (1978). Specification Tests in Econometrics. Econometrica, 46(6), 1251-1271. https://doi.org/10.2307/1913827   DOI
12 He, Y., Chen, C., & Hu, Y. (2019). Managerial overconfidence, internal financing, and investment efficiency: Evidence from China. Research in International Business and Finance, 47, 501-510. https://doi.org/10.1016/j.ribaf.2018.09.010   DOI
13 Heaton, J. B. (2002). Managerial Optimism and Corporate Finance. Financial Management, 31(2), 33-45. https://doi.org/10.2307/3666221   DOI
14 Malmendier, U., & Tate, G. (2005a). CEO Overconfidence and Corporate Investment. The Journal of Finance, 60(6), 2661-2700. https://doi.org/10.1111/j.1540-6261.2005.00813.x   DOI
15 Jiang, F., Cai, W., Wang, X., & Zhu, B. (2018). Multiple large shareholders and corporate investment: Evidence from China. Journal of Corporate Finance, 50, 66-83. https://doi.org/10.1016/j.jcorpfin.2018.02.001   DOI
16 Kahneman, D., & Tversky, A. (2012). Prospect Theory: An Analysis of Decision Under Risk. In World Scientific Handbook in Financial Economics Series: Vol. Volume 4. Handbook of the Fundamentals of Financial Decision Making (pp. 99-127). https://doi.org/10.1142/9789814417358_0006
17 Kruger, J. (1999). Lake Wobegon be gone! The "below-average effect" and the egocentric nature of comparative ability judgments. Journal of Personality and Social Psychology, 77(2), 221-232. https://doi.org/10.1037/0022-3514.77.2.221   DOI
18 Lambert, J., Bessiere, V., & N'Goala, G. (2012). Does expertise influence the impact of overconfidence on judgment, valuation and investment decision? Journal of Economic Psychology, 33(6), 1115-1128. https://doi.org/10.1016/j.joep.2012.07.007   DOI
19 Malkiel, B. G., & Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance, 25(2), 383-417. https://doi.org/10.1111/j.1540-6261.1970.tb00518.x   DOI
20 Abdin, S. Z., Farooq, O., Sultana, N., & Farooq, M. (2017). The impact of heuristics on investment decision and performance: Exploring multiple mediation mechanisms. Research in International Business and Finance, 42, 674-688. https://doi.org/10.1016/j.ribaf.2017.07.010   DOI
21 Akerlof, G. A. (1978). The Market for "Lemon": Quality uncertainty and the market mechanism. In P. Diamond & M. Rothschild (Eds.), Uncertainty in Economics (pp. 235-251). https://doi.org/10.1016/B978-0-12-214850-7.50022-X
22 Arellano, M., & Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. The Review of Economic Studies, 58(2), 277-297. https://doi.org/10.2307/2297968   DOI
23 Gervais, S., Heaton, J. B., & Odean, T. (2003). Overconfidence, Investment Policy, and Executive Stock Options. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.361200
24 Ascioglu, A., Hegde, S. P., & McDermott, J. B. (2008). Information asymmetry and investment-cash flow sensitivity. Journal of Banking & Finance, 32(6), 1036-1048. https://doi.org/10.1016/j.jbankfin.2007.09.018   DOI
25 Chen, X., Sun, Y., & Xu, X. (2016). Free cash flow, over-investment and corporate governance in China. Pacific-Basin Finance Journal, 37, 81-103. https://doi.org/10.1016/j.pacfin.2015.06.003   DOI
26 Feather, N. T., & Simon, J. G. (1971). Causal attributions for success and failure in relation to expectations of success based upon selective or manipulative control. Journal of Personality, 39(4), 527-541. https://doi.org/10.1111/j.1467-6494.1971.tb00060.x   DOI