Research on How Managerial Overconfidence Impacts Cash Dividends Policy Case of the U.S. market

Sammanfattning: The main purpose of this thesis is to statistically analyze the impact of managerial overconfidence on cash dividends policy via fifty U.S. selected case firms during year 2008 to 2017. Intuition behind this is to take a closer look at and potentially detail the neoclassical MM dividends irrelevance policy, also to additionally take organizational behavior into consideration. In spite the fact that most dividend payout could be explained by classical theories of dividend distribution policy, quite a number of decisions on dividend payout, such as dividends paid are sometimes even lower than bank interests, are way too complicated to account for. This has much to do with the reality against the “rational economic man” assumption, as behaviour pattern of overconfident managers reveals the tendency for them to overestimate the value of investments’ cash flows and underestimate the risk they may bring in meanwhile, thus financially support too many investment projects with net present value below zero. To do such research on how managerial overconfidence impacts dividends policy helps make up for long existing problems of unexplained phenomenon on cash dividend payout and furthermore abnormally fluctuating stocks markets. In addition, the research contributes to setting relevant policies on distribution of resources more rationally for individual firms.