The effect of managerial overconfidence on the market timing ability and post-buy back performance of open market repurchases. In this study sample, the average of independent board of all firms included in this study has only 37 percent, and this is one of concurrent evidence as to the independent board in Chinese listed firm simple assigned to fulfill the institutional obligation of one-third ratio. Acad Manag Rev 28:416431, Mahdi O, Mahdi M, Mohammad-Ali BV (2017) Corporate governance, productmarket competition, and firm performance: evidence from Iran. Adv Financ Econ 9:265285, McDonald K, Westphal JD (2008) Demographic diversity in the boardroom: mediators of the board diversity-firm performance relationship. Internal CG includes the controlling mechanism between various actors inside the firm: that is, the company management, its board, and shareholders. The Big Bet: How Businesses Can Cash In On Merchandizing, Navigating The Complexities Of Cell And Gene Therapy Supply Chain: A CEOs Practical Guide, Optimizing Brand Platforms And Overcoming Uncertainty In 2023, Why More Companies Should Practice Compassionate Capitalism (And How To Do It Effectively), Using AI To Compliment Cybersecurity And Threat Detection, Future Of Work Part 3: Creating Upward Mobility In Your Organization, Five Artificial Intelligence Predictions For The Near Future, 15 Innovation Tips Big Businesses Can Learn From Small Businesses. Good corporate governance means leaders are aware of the impact the company generates on its stakeholders, have the capacity to respond to stakeholder needs and are always prepared to face the various challenges that the future may bring. J Financ Econ 120(1):194209, Hribar BP, Yang H (2016) CEO Overconfidence and management forecasting. All data collected from Chinese listed firms only issued on A shares in domestic stoke market exchange of Shanghai and Shenzhen. Managerial overconfidence negatively influences the impact of ownership concentration on firm performance. Following the previous studies [22], Wei Hu et al. [57] reported high product market competition associated with poor firm performance measured by TQ in Chinese listed firms. The study findings showed that ownership concentration and product market competition have a positive significant relationship with firm performance measured by ROA and TQ. Overconfident managers gain much more power than rational managers that they are able to use the firm to further their own interests rather than the interests of shareholders and managerial overconfidence is a behavioral biased that managers follow to meet their goals and reduce the wealth of shareholders. Firms must consider remote and hybrid working arrangements when planning to hire. As Yu and Wen [92] argued, Chinese companies have a concentrated ownership structure, limited disclosure, poor investor protection, and reliance on the banking system. In other ways, agency theory, many opponents suggest that CEO duality reduces the monitoring role of the board of directors over the executive manager, and this, in turn, may harm corporate performance. In another way, the weakness of independent board monitoring ability allows CEOs overconfident that may damage firm value. The system GMM is the econometric analysis of dynamic economic relationships in panel data, meaning the economic relationships in which variables adjust over time. Corporate governance is the system or structure of rules, practices, and laws by which a firm is directed and controlled. In the perspective of resource dependence theory, an independent director is often linked firm to outside environments, who are non-management members of the board. Corporate governance mechanisms are assumed to be an appropriate solution to solve agency problems that may derive from the potential conflict of interest between managers and officers, on the one hand, and shareholders, on the other hand [42]. Implementing target-oriented internal corporate governance mechanisms such as board diversity, board independence, the board size, the board-level sustainability committee, the role of the CEO, ownership concentration, and the disclosure and transparency practice enables firms to implement target-oriented sustainability measures. Board of Directors. The bigger this index is, the more the concentration and the less the competition in that industry will be, vice versa. Corporate governance is a set of rules, practices, and processes used to direct and control an organisation. These indices are calculated based on the percentages of a number of top shareholders shareholdings in a company, usually the top ten or twenty shareholders. Truly comprehensive corporate governance can support companies in achieving a balance between business and reputation, always taking sustainability and long-term value creation into account. It proposed that overconfidence managers moderate the relationship of debt financing and performance in Chinese listed firm: The study finding is unobvious; it negatively influenced the relation of debt financing with accounting-based firm performance measure (=0.059, p<0.01) and positively significant market base firm performance (=0.735, p<0.05). [71] concluded that managerial overconfidence can significantly affect corporate activities and outcomes. This study aims to examine the impact of corporate governance mechanisms on financial and non-financial aspects of firm performance in medium and large-scale manufacturing firms in Ethiopia.,The cross-sectional survey and simple random sampling methods are adopted while the data collection is through a questionnaire that Specifically, TF has written the all parts of the manuscript (introduction, literature), collected, analyzed, and interpreted the patient data regarding the impact of corporate governance on firm performance and as well as the influence of managerial behavior in the relationships corporate governance and firm value in Chinese listed firms. Econ Model 40(C):111, OECD (2004). J Serv Sci Manag 10:260279, Liu Y, Miletkov MK, Wei Z, Yang T (2015) Board independence and firm performance in China. Int J Econom Finance 3(1):105118, Jensen MC (1986) Agency costs of free cash flow, corporate finance, and takeovers. Agency theory view proposed that duality could minimize the boards effectiveness of its monitoring function, which leads to further agency problems and enhance poor performance [41, 83]. Tables 3 and 4 indicate the p-value of Hansen test over-identification 0.139 and 0.132 for ROA and TQ measurement of firm performance, respectively, so that these models cannot reject the hypothesis of the validity of instruments. hYvF+z !)8eG;lAFgn All]]['.+X,S;6Rv5|OfU 4Mz,rb[Ol?|L,HX.0RlOl7M<6OY?S/kK_|jV3u6u,VZpr9Zvvje)
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(jMk.#'[o! 9YOC8Y[ C]0~_J\lV9~)q)$KNB6 *d,yS. J Financ Econ 105(3):581606, Wu S, Cui H (2002) Consequences of the concentrated ownership structure in Mainland ChinaEvidence of Year 2000. Debt financing is one of the important governance mechanisms in aligning the incentives of corporate managers with those of shareholders. Bell J Econ 14:366382, Heaton JB (2002) Managerial Optimistic and Corporate Finance. This study sample was limited to only listed firms on the stock market, due to hard to access reliable financial and corporate governance data of unlisted firms. J Financ Econ 127:519459, Report H (2003) Review of the role and effectiveness of non-executive directors. Evidence from market-oriented and block holder-based governance regime. Shareholders often elect individual board members at the corporations annual shareholder meeting or conference. In this condition, these two roles in one person made a concentration of power and responsibility, and this may result in busyness of CEO which affects the normal duties of a company. Employees, customers, and other stakeholders are increasingly concerned about privacy; therefore, its incumbent upon organizations to take these issues seriously. Corporate governance is altogether different from the daily operational decisions and activities that are executed by the management of an organization. The author received no financial support for the research. 2023 BioMed Central Ltd unless otherwise stated. Compliance, however, does not fit traditional Managerial overconfidence was measured by the corporate earnings forecasts. Second, this study provides evidence that how managerial behavioral bias interacts with CG mechanisms to affect firm performance, which has not been studied in previous literature. As a result, at some level of ownership concentration the distinction between insiders and outsiders becomes unclear, and block-holders, no matter what their identity is, may have strong incentives to switch resources to the ways that make them better off at the cost of other shareholders. This article was written by the Bizfluent team, copy edited, and fact checked through a multi-point auditing system, in efforts to ensure our readers only receive the best information. Dong J, Gou Y (2010) Corporate governance structure, managerial discretion, and the R&D investment in China. J Manage Stud 48(3):487513, Carpenter MA, Westphal JD (2001) The impact of director appointments on board involvement in stra- tegic decision making. So, this study believes that firms with overconfident managers will have lower debt. California Privacy Statement, The interaction of managerial overconfidence and CEO duality has a significant negative effect on operational firm performance (0.0202, p>0.05) and a negative insignificant effect on TQ. 2001. Board of directors monitoring has been centrally important in corporate governance. The debt financing proxy in this study is measured by the percentage of a total asset over the total debt of the firm following the past studies [69, 95]. The study makes several important contributions to the literature. This proclamation is staying stable till now, and the number of independent directors in Chinese listed firms is increasing from time to time due to its importance. Financial Management 31(2):3345, Ho P-H, Huang C-W, Lin C-Y, Yen J-F (2016) CEO overconfidence and financial crisis: evidence from bank lending and leverage. is a vector of independent variable. Allen F, Gale D (2000) Corporate governance and competition. This finding is consistent with [38] finding that overconfident CEOs have lower debt, because of overestimating the investment projects. 2) Hansen test over-identification is to detect the validity of the instrument in the models. Acting in tune with the companys stakeholders can increase trust in the ecosystem, reduce uncertainties and problems, and improve decision-making. Dharmastuti, and Wahyudi (2013). The board is often responsible for reviewing company management and removing individuals who don't improve the companys overall financial performance. Russias invasion of Ukraine in 2022, coupled with strained relations between two of the worlds economic superpowers (the US and China), are a few of many factors that have converged to create chaos in supply chains, as well as subsequent economic uncertainty on a global scale. In contrast, as the study [7] indicated, as the number of the internal board increases, the impact of managerial overconfidence in the firm became increasing and positively correlated with the leadership duality. [38] noted that overconfident managers normally overestimate the profitability of investment projects and underestimate the related risks. Acad Manag J 44:639660, Chen CH, Al-Najjar B (2012) The determinants of board size and independence: evidence from China. Thus, the study includes both internal and external CG mechanisms to broadly show the connection of these components. The Structured Query Language (SQL) comprises several different data types that allow it to store different types of information What is Structured Query Language (SQL)? Md. Prior studies provided different empirical evidence such as [14], suggested that the monitoring efficiency of the board of directors is affected by internal and external factors like government regulation and internal firm-specific factors; the role of board monitoring is determined by ownership structure and firm-specific characters Boone et al. Maybe bad governance can be ignored when companies are small, but problems are not so easily dismissed when billions of dollars and large numbers of people are involved. J Corp Finan 12(3):381402, Giroud X, Mueller H (2011) Corporate Governance, Product Market Competition, and Equity Prices J Finance 66(2):563600, Hair JF, Black WC, Babin BJ, Anderson RE, Tatham RL (2006) Multivariate data analysis. It is a commitment device for executives. Even with the absence of agency conflicts and asymmetric information problems, there is evidence documented for distortions such as the case of corporate investment. The paper aims to investigate the impact of corporate governance (CG) measures on firm performance and the role of managerial behavior on the relationship of corporate governance mechanisms and firm performance using a Chinese listed firm. Furthermore, good corporate governance develops a number of consistent mechanisms, internal control systems and external environments that contribute to the business corporations increase effectively as a whole to bring about good corporate governance. China Finance Rev Int10(3):271276, Lina C, MabDongwei YS (2009) Corporate governance and firm efficiency: evidence from chinas publicly listed firms: manage. Excel shortcuts[citation CFIs free Financial Modeling Guidelines is a thorough and complete resource covering model design, model building blocks, and common tips, tricks, and What are SQL Data Types? Gillan [30] suggested that corporate governance can be divided into two: the internal and external mechanisms. The impact of corporate governance measures on firm performance: the influences of managerial overconfidence, $${\text{y}}_{{{\text{it}} }} = \, \alpha {\text{y}}_{{{\text{it}} - {1} }} + \beta {\text{ X}}_{{{\text{it}}}} + \, \varepsilon_{{{\text{it}}}}$$, $$\varepsilon_{{{\text{it}}}} = \, \mu_{{\text{i}}} + {\text{ v}}_{{{\text{it}}}}$$, https://doi.org/10.1186/s43093-021-00093-6, https://doi.org/10.1007/s10490-009-9135-6, https://doi.org/10.1080/16081625.2019.1673190, http://www.oecd.org/corporate/ca/corporategovernanceprinciples/31557724.pdf, http://creativecommons.org/licenses/by/4.0/. J Account Econ. J Finan Econom 3(4):305360, Keasey K, Wright M (1993) Issues in corporate accountability and governance: an editorial. All appointments to the Board must be voted upon by the shareholders of the company. Study sample average firms age was 8.61years old. The average value of the independent board of directors ratio was 0.374. However, hypothesis 1 indicated that there is a positive and significant relationship between independent board and firm performance, which is not supported. This finding is consistent with studies ([86]; Pant et al., [69]; [77, 82]) that noted that debt financing has a negative effect on firm values. Mcdonald et al. These discussions lead to the conclusion that CEO overconfidence will negatively or positively influence the relationships of CG on firm performance. A dynamic panel data model is written as follows: where yit is the current year firm performance, is representing the constant, yit1 is the one-year lag performance, i is the individual firms, and t is periods. J Bus Finance Account 32(910):19211960, Brown R, Sarma N (2007) CEO overconfidence, CEO dominance and corporate acquisitions. PubMedGoogle Scholar. This means the behavior of overconfident executives may affect controlling and monitoring role of internal/external CG mechanisms. Researchers [34,61] discussed the managerial behavioral bias has a great impact on firm corporate governance practices. Stakeholder primacy purports that the needs and outcomes of all stakeholders including employees, customers, supply chain partners, and members of the communities in which an organization operates (not just shareholders) should be considered in all strategic and operational decisions. In this study, firm size is measured by the logarithm of total assets following a previous study. CSMAR database is designed and developed by the China Accounting and Financial Research Center (CAFC) of Honk Kong Polytechnic University and by Shenzhen GTA Information Technology Limited company. Literature suggests that when leverage increases, managers may invest in high-risk projects in order to meet interest payments; this action leads lenders to monitor more closely the managers action and decision to reduce the agency cost. 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