DOI: 10.5176/2251-1997_AF18.193
Authors: Yi-Hsun, Lai, Vivian W. Tai
Abstract:
This study investigates the impact of CEO overconfidence on insurers’ cash holdings. Our results show that the impact of overconfident manager on cash holding is significant and negative relation. Because an overconfident manager believes external financing to be excessively costly but expects this cost to decrease over time. As a result, the managerial delays raising external financing while funding current investments with internal cash, resulting in a lower cash balance. Finally, we find that overconfidence manager’s liquidity decision still not influenced by the Financial Crisis, but the underwriting cycle and Sarbanes-Oxley mitigate the effect of overconfidence manager on cash holdings.
Keywords: CEO overconfidence, cash holdings, liquidity, property-liability insurance
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