Managerial Optimism and the Perception of Financial Constraints

David Florysiak, Tobias Heizer

Publikation: Working paperForskning

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Resumé

We find that optimistic managers are more likely to perceive financing constraints, which is a fundamental but previously untested prediction of behavioral corporate finance theory. However, this effect is statistically significant but relatively small compared to other previously identified determinants of perceived financing constraints. Moreover, the vast majority of optimistic managers actually do not perceive any financing constraints. Our findings have implications for both behavioral corporate finance and financial constraints research. We argue that previous findings relating optimism and corporate policies are probably driven by perceived financing constraints and not optimism. Apart from their potential usefulness, commonly applied financial constraint indices are likely to be biased by not accounting for managerial optimism. Our analysis is based on large survey panel data for high-level managers of 2,897 German firms for the period 1995 to 2010, which is matched with financial and non-financial firm-level information. The data enable us to implement a survey based measure of managerial optimism and to directly access the managers’ perception of financing constraints from survey answers.
OriginalsprogEngelsk
StatusUdgivet - 2017

Fingeraftryk

Financing constraints
Financial constraints
Optimism
Managers
Behavioral corporate finance
Prediction
Usefulness
Panel data
Corporate policy

Citer dette

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Managerial Optimism and the Perception of Financial Constraints. / Florysiak, David; Heizer, Tobias.

2017.

Publikation: Working paperForskning

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