Can Overconfident Executives Restrain Overinvestment?

Liu, Xuanbing

doi:10.4236/me.2017.88073

Cited by 2 publications

(2 citation statements)

References 23 publications

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“…Using data from public companies between 2013 and 2015, Liu [39] examined the relationship between overconfidence of executives and overinvestment, as well as the ways in which the relationship changes depending on the financing ability of the company. The outcomes suggested that, when the financing ability of the company is low, overconfidence may limit overinvestment.…”

Section: Prior Research On Investment Efficiencymentioning

confidence: 99%

The Influence of Corporate Environmental Responsibility on Overinvestment Behavior: Evidence from South Korea

Lee

Kim

2020

Sustainability

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The purpose of this paper is to examine the association between corporate environmental responsibility (CER) activities and investment efficiency as measured by overinvestment, and whether the industry-level competition affects this association. We investigate a sample of 2285 non-financial firms with fiscal year-end in December listed in the Korea Stock Exchange Market for the period of 2013–2018, measuring the investment efficiency by overinvestment model. Using environmental scores from the Korea Corporate Governance Service to measure CER activities, we show that, on average, firms can decrease overinvestment behavior through CER activities in South Korea. Moreover, in firms in a highly competitive market, the negative association between CER activities and overinvestment is pronounced, indicating that strong product market competition are effective in monitoring managerial opportunistic behavior. These results are robust, even after controlling for different setting and alternative CER. These findings also suggest that the relationship between CER and overinvestment appears to be benefit firms that are sound and sustainable and honestly present their financial information.

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Section: Prior Research On Investment Efficiencymentioning

confidence: 99%

The Influence of Corporate Environmental Responsibility on Overinvestment Behavior: Evidence from South Korea

Lee

Kim

2020

Sustainability

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“…Recent studies on global overinvestment have primarily been conducted in the United States and China, and they are contentious in a variety of ways. Typically, studies in China focus on assessing overinvestment behavior and the factors that explain this overinvestment behavior [4][5][6][7] . Overinvestment is closely related to the use of corporate debt.…”

Section: Introductionmentioning

confidence: 99%

Application of machine learning in classification of overinvestment: Evidence from listed firms in Vietnam stock exchange market

Phan Huy,

Ngo Dinh Linh,

Nguyen Thi Ngoc

et al. 2023

Sci.Tech.Dev.J.-Eco.Law Manag.

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Studies have consistently demonstrated that both overinvestment and underinvestment exert adverse effects on the overall efficacy of business operations, showcasing the significance of understanding and addressing these phenomena in the realm of scholarly research. Therefore, in this study, we aim to develop an accurate machine-learning model to identify overinvestment in firms listed on the HSX and the HNX stock exchanges in Vietnam. We decided to conduct a comparison to identify the optimal model for classifying firms of overinvestment or not, including Logistic Regression, K-Nearest Neighbor (KNN), Naive Bayes (NB), Support Vector Machine (SVM), Decision Tree, and Random Forest. Using a sample of 658 non-financial listed companies in Vietnam between 2011 and 2021, our result shows that the most importance predictor variable is "FCF" (free cash flow), with an importance value of 0.14. Although both logistic regression and random forest (RD) algorithms demonstrate high accuracy in identifying firms with overinvestment, the Random Forest algorithm exhibits slightly higher precision and recall for class 1 (overinvestment firms) when compared to Logistic Regression. By contrast, the accuracy performance of the four models (NB, KNN, DT, and SVM) is low, ranging from 0.53 to 0.67. At the microeconomic level, this research can help businesses gain insights into their financial performance, identify areas for improvement, and take proactive measures to avoid financial distress and improve profitability by identifying potential cases of overinvestment. Overall, the study provides a valuable contribution to the field of financial analysis using machine learning techniques. We firmly believe that the findings of this research will serve as a significant scholarly reference for future investigations in the field and explore other importance predictors of overinvestment in Vietnam and other emerging markets.

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Can Overconfident Executives Restrain Overinvestment?

Cited by 2 publications

References 23 publications

The Influence of Corporate Environmental Responsibility on Overinvestment Behavior: Evidence from South Korea

The Influence of Corporate Environmental Responsibility on Overinvestment Behavior: Evidence from South Korea

Application of machine learning in classification of overinvestment: Evidence from listed firms in Vietnam stock exchange market

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