Testing trade-off theory and pecking order theory under managerial overconfidence

Variables	Formula	The sample		Subsample of overconfident managers		Subsample of nonoverconfident managers		p-value
		Mean	Median	Mean	Median	Mean	Median
Value of total assets	Thousands PLN	77,152	4,702	139,472	4,897	23,031	4,353	0.238
Value of fixed assets	Thousands PLN	51,728	1,005	103,216	1,275	7,014	860	0.000***
Value of equity	Thousands PLN	47,495	2,113	89,060	2,085	11,399	2,278	0.064*
Value of total liabilities	Thousands PLN	29,657	1,926	50,413	1,935	11,633	1,926	0.014**
Value of long- term liabilities	Thousands PLN	14,170	9	28,623	0.0	1,619	32	0.244
Debt ratio	Total liabilities to total assets	0.6	0.5	0.6	0.5	0.5	0.5	0.283
Financial leverage	Total liabilities to equity	1.3	0.7	1.3	0.7	1.3	0.7	0.537
Equity financing	Equity to fixed assets	−20.7	1.6	−17.1	1.3	−23.8	2.1	0.000***
Long-term financing	Long-term liabilities and equity to fixed assets	27.0	1.9	−16.7	1.7	65.1	2.4	0.000***

Variables	The sample		Subsample of overconfident managers		Subsample of nonoverconfident managers		p-value
	Mean	Median	Mean	Median	Mean	Median
Employees	225	25	265	25	192	25	0.187
Company age	18	16	17	15	18	17	0.276
The size of management board	1.7	1.0	1.7	1.0	1.8	2.0	0.295
Number of shareholders	9.9	2.0	9.9	2.0	9.9	2.0	0.831
Manager’s age	54 years	55 years	55 years	56 years	55 years	55 years	0.374
Managerial ownership	50%	50%	49%	50%	51%	50%	0.725
Years as a president	12	11	11	11	13	11	0.178

Variables	Formula	The sample		Subsample of overconfident managers		Subsample of nonoverconfident managers		p-value
		Mean	Median	Mean	Median	Mean	Median
Target leverage	—	0.66	0.65	0.65	0.64	0.69	0.67	0.000***
Difference	Difference between target and actual debt ratio	0.12	0.15	0.10	0.14	0.13	0.16	0.000***

Variables	Formula	The sample		Subsample of overconfident managers		Subsample of nonoverconfident managers		p-value
		Mean	Median	Mean	Median	Mean	Median
Profitability	EBITDA to total assets	0.10	0.09	0.09	0.09	0.11	0.09	0.002***
Dividend ratio	Dividend to net profit	0.91	0.46	0.81	0.45	1.0	0.46	0.782
Tangibility	Fixed assets to total assets	0.31	0.23	0.34	0.29	0.28	0.20	0.000***
Depreciation ratio	Depreciation to total assets	0.03	0.02	0.04	0.02	0.03	0.02	0.179

Variable	Estimates	Standard error	p-value	t statistics
Constant	0.59966	0.03476	0.000***	17.25
Profitability	−0.51063	0.13240	0.000***	−3.86
Dividend	0.00901	0.00458	0.049**	1.97
Tangibility	0.38470	0.05765	0.000***	6.67
Depreciation	−0.77435	0.16317	0.092*	−1.88

Variables	Debt	Equity	Long-bank term loan	Short-bank loans term	Payables	capital Share	Reserve capital
OC	−0.001	0.015	−0.002	0.001	0.000	0.002	0.018
	(0.675)	(0.012)**	(0.377)	(0.804)	(0.865)	(0.091)*	(0.002)***
DEF	0.044	−0.010	0.053	0.080	−0.090	0.004	−0.008
	(0.000)***	(0.721)	(0.000)***	(0.000)***	(0.000)***	(0.383)	(0.775)
R square	0.025	0.011	0.043	0.084	0.083	0.006	0.016
F statistics	7,359	3,259	12,617	25,659	25,346	1,658	4,738
(p-value)	(0.001)	(0.039)	(0.000)	(0.000)	(0.000)	(0.091)	(0.009)

Variables	Debt ratio	Financial leverage	Equity financing	Long-term financing
Overconfidence	−0.015 (0.195)	−0.138 (0.179)	−2.328 (0.003***)	−2.321 (0.003***)
EFL	0.520 (0.000***)	3.280 (0.000***)	8.344 (0.260)	8.371 (0.258)
Risk	0,006 (0,979)	−0,756 (0,647)	1.098 (0.501)	1.079 (0.508)
tangibility	−0.147 (0.009***)	−0.827 (0.032**)	—	—
Size	—	—	−1.064 (0.843)	−1.064 (0.843)
Dividend ratio	−0.006 (0.308)	−0.051 (0.174)	−0.171 (0.962)	−0.198 (0.956)
R-square	0.151	0.135	0.050	0.049
F statistics, (p-value)	8.550 (0.000***)	7.460 (0.000***)	2.351 (0.042**)	2.338 (0.043**)

Variables	Formula	The sample		Subsample of overconfident managers		Subsample of nonoverconfident managers		p-value
		Mean	Median	Mean	Median	Mean	Median
EFL	ROE-ROA	0.06	0.04	0.06	0.05	0.06	0.03	0.001***
Risk	SD of ROA	0.07	0.05	0.08	0.05	0.07	0.05	0.620
Tangibility	Share of fixed assets in total assets	0.31	0.23	0.34	0.29	0.28	0.20	0.000***
Dividend ratio	The relation of dividend paid to net profit	0.91	0.46	0.81	0.45	1.0	0.46	0.782

Variables	Formula	The sample		Subsample of overconfident managers		Subsample of nonoverconfident managers		p-value
		Mean	Median	Mean	Median	Mean	Median
Deficit	Thousand PLN	62.575.0	167.0	49.765.0	187.6	73.555.0	131.0	0.100*
Deficit ratio	Deficit to total assets	0.0852	0.0542	0.0813	0.0693	0.0885	0.0518	0.537
Investment	CapEx to total assets	0.042	0.018	0.047	0.021	0.039	0.016	0.007***
Debt	Increase in debt to total assets	0.005	0.000	0.001	0.000	0.008	0.000	0.112
Equity	Increase in equity to total assets	0.027	0.017	0.048	0.015	0.012	0.017	0.035**
Cash holdings	Cash holdings to total assets	0.163	0.069	0.175	0.076	0.152	0.063	0.684

Périodicité:: 4 fois par an
Sujets de la revue:: Business and Economics, Political Economics, Economic Theory, Systems and Structures, Business Management, Management Accounting, Financial Controlling, Cost Calculation, Investment