Investor Overconfidence, Firm Valuation, and Corporate Decisions

• 成果类型: Article
• 署名作者: Adebambo, Biljana N.; Yan, Xuemin (Sterling)
• 署名单位: University of San Diego; University of Missouri System; University of Missouri Columbia
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2017.2806
• 发表日期: 2018
• 页码: 5349-5369
• 关键词: Overconfidence; Firm valuation; Corporate investment; Equity financing

摘要

Behavioral theory predicts that investor overconfidence leads to overpricing because overconfident investors overestimate the quality of their information and underestimate risk. We test this prediction by using a measure of investor overconfidence derived from the characteristics and holdings of U.S. equity mutual fund managers. We find that firms with more overconfident investors are relatively overvalued based on the market-to-book ratio and a misvaluation measure. The result is stronger among stocks with greater mutual fund ownership, particularly by active mutual funds. Firms with more overconfident investors also exhibit lower subsequent stock returns, issue more equity, and invest more. Overall, our findings suggest that investor overconfidence is significantly related to firm valuation and corporate decisions.