Research on Manager’s Overconfidence and Enterprise Financial Dilemma: A Case Analysis Based on LeEco company

Abstract

Most business managers will overestimate their abilities, have greater confidence in the business situation of enterprises, easily overestimate investment returns and underestimate the risks in operation. Such overconfidence will easily lead to radical financial decisions and increase the probability of enterprises falling into financial difficulties. This paper takes the former Star Enterprise LeEco Company as the research object. From the perspective of managers' overconfidence, it takes managers' investment and financing behavior as intermediary variable to explore how managers' overconfidence affects and causes enterprises to fall into financial distress. It is found that managers' overconfidence will make enterprises tend to over-investment and prefer debt financing, and then increase the financial risk of enterprises, and make enterprises fall into financial difficulties. Keywords—LeEco; Overconfidence of managers; Financial