Managerial Overconfidence And Corporate Diversification In Switzerland

Lin, Zeng Yeik (2019) Managerial Overconfidence And Corporate Diversification In Switzerland. [Final Year Project Report] (Unpublished)

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Abstract

The purpose of this research study is to investigate the relationship between managerial overconfidence, corporate diversification, firm performance and firm characteristic. This study examines the top 100 public companies in Switzerland from 2010 to 2017 with a total observation of 800. This study views corporate diversification in two different aspects which are product diversification and geographical diversification. Two proxies for the managerial overconfidence, which consist of overinvestment and net buyers, are used in this study. The empirical findings indicate that managerial overconfidence does not have effect on product diversification but there is statistically significant and positive effect on geographical diversification. Moreover, this study also determines that geographical diversification has positive relationship with firm performance but has no significance with product diversification. Lastly, firm characteristics such as firm leverage and firm size are examined and proved to have positively relationship with either geographical diversification or product diversification. However, the findings also indicate that firm performance is statistically significant but shares negative relationship with geographical diversification.

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