Investigating the effect of managers 'distrust and double investment on companies' financial distress

Subject Areas :

Houshang Alipour ¹ (Department of Industrial-Financial Management, Islamic Azad University, Kish Branch, Kish, Iran)
Reza Tehrani ² (Department of Financial Management,, University of Tehran,, Tehran, Iran)
Aboutorab Alirezaei ³ (Associate Professor of Industrial-Production Management, Islamic Azad University, South Tehran Branch, Tehran, Iran)
Ghanbar Abbaspour Esfadan ⁴ (Assistant Professor of Industrial Management-Operational Research-Group Decision Making, Islamic Azad University, South Tehran Branch, Tehran, Iran)

Received: 2022-03-16 Accepted : 2022-05-09 Published : 2022-05-22

Keywords: Overconfidence, bankruptcy, Overinvestment,

Abstract :

The purpose of this study was to investigate the relationship between managers' Overconfidence and Overinvestment on bankruptcy of listed companies in Tehran Stock Exchange. In this Study, to measure the managers' more trust, the profit margin criteria of each share were used with real profits, average capital expenditures and surplus investment in assets, and the number of 122 companies in the period of 1396-1390 as a statistical sample has been selected. The findings of the research show that there is a positive and significant relationship between managers' Overconfidence and Bankruptcy. In general, the results from the hypotheses suggest that managers more than trust the ability to assess their abilities, meaning that the more people have more information about or have some knowledge of, they will increase their optimism. If these people are involved in or contributing to the project, the results are less optimistic and the risk of the project less realistic and the projects on which they invest heavily, the units of investment with the net negative value projects that ultimately bring the company's capital to They waste. Consequently, companies may have fewer cash flows to deal with sudden accidents leading to bankruptcy. The effect of Overinvestment has also been positively assessed on the bankruptcy of companies.