MANAGERIAL OVERCONFIDENT AND FIRMFINANCING DECISION: AN INDONESIAN CASE

Murhadi, Werner Ria (2017) MANAGERIAL OVERCONFIDENT AND FIRMFINANCING DECISION: AN INDONESIAN CASE. Proceedings ALJEBI, 2017. pp. 244-260. ISSN 978-602-6428-08-0

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Abstract

Purpose – This research aims to determine the effect of managerial overconfidence and firm characteristics on financing decision of a firm. Design/methodology/approach – This research uses panel data to follow the panel model testing by using Common Effect (CE), Fixed Effect Model (FEM), and Random Effect Model (REM), to test the effect of managerial overconfidence and firm characteristic onfinancing decision of firms listed in Bursa Efek Indonesia in the period of 2006 – 2015. Findings – Researcher founds: First, the higher the confidence of an executive, judged by the profile photo, the smaller the debt used by the firm; Second, the higher the past performance of a ratio, measured from the cash flow on operational activity to total asset, the debt used by the firm tends to decrease. Third, a higher education level of the executive tends to increase the usage of debt by the firm; Fourth, the past working experience ofa CEO will make him able to face many situationsby using the available information and likely to be unbiased. These abilities will formhis confidence, resulting in less usage of debt by the firm. Finally, gender does not have a significant effect on the size of debt in a firm. Practical Implications – the finding indicates that behavioral factor, such as managerial overconfidence, can explain the reason of the usage of debt in a firm. Originality/Value – the research that uses behavioral finance aspect to explain the financing decision in a firm is still relatively rare conducted in Indonesia.

Item Type: Article
Uncontrolled Keywords: Financing decision, behavioral finance, managerial overconfidence, firm characteristics
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Business and Economic > Department of Management
Depositing User: Werner R. Murhadi 31124
Date Deposited: 19 Jul 2017 08:22
Last Modified: 19 Jul 2017 08:22
URI: http://repository.ubaya.ac.id/id/eprint/30383

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