The Relationship Between Managerial Over-Confidence, Internal Financing, And Investment Efficiency In Companies Listed On Tehran Stock Exchange

Abstract

The purpose of the current study was examining the relationship between managerial overconfidence, internal financing, and investment efficiency in the companies listed on Tehran Stock
Exchange. A sample of the companies listed on Tehran Stock Exchange over 146 firms in a year was
studied over a 5-year period (2013-2017) to test the hypotheses after initial data collection and
screening. Excel software was used to calculate and classify the variables. Then multivariate regression
analysis in Eviews software was used to test the research hypotheses. The results showed a positive
relationship between managerial over-confidence and internal financing. Moreover, there were no
positive relationships between internal financing and commercial capital. There were no positive
relationships between internal financing and investment efficiency and no negative relationships was
observed between internal financing and under-investment. The over-confidence of the managers who
tend to expand their investment, needs an increase in their internal budget. However, this tendency does
not cause under- or over-investment.