Investigating the Relationship between Mass Behavior, Risk Priority, and Inefficient Investment: The Moderating Role of Managerial Overconfidence

The psychological distraction of managers, given the hypothesis of limited rationality, often leads to decisions on inefficient investment. This study aims to examine moderating effect managerial overconfidence on the relationship among risk priority, aggregate behavior, and inefficient investment of managers. To achieve this goal, data are provided based on statistical data and questionnaire. Questionnaire’s taken over 320 of individuals, are gathered and the hypothesis is analyzed using PLS method. The results show that managerial overconfidence plays a moderating role on the relationship between aggregate behavior and inefficient investment. in addition, managerial overconfidence has impact on the relationship between risk priority and inefficient investment. The findings reveal that understanding irrational behaviors of managers is important in investment decision making. managers can considerably decrease the positive effect of mass behavior on insufficient behavior and noticeably can also decrease the prohibitive effect of risk priority on inefficient investment.