Senior manager overconfidence, managerial discretion and dividend policy: A study of Chinese listed companies

The research attempts to link managerial overconfidence with dividend policy in an emerging market in China. In addition, it proposes and tests if managerial discretion factors such as duality, cash flow and market growth, moderate that relationship by using 745 companies as our sample. The results show that, like in Western countries, senior manager over confidence and dividend policy are negatively related and that relationship is strengthened by duality and cash flow. However, the proposed market growth variable does not show significance in strengthening the relationship between over confidence and dividend distribution. The current study attributes that to the uniqueness of an emerging market. It also tests and finds that other unique factors, such as state ownership and political connection in China, weaken the overconfidence and dividend relationship. Scholars should carefully examine if models and concepts applicable in Western countries can also be used in emerging markets.