Internal-Control Willingness and Managerial Overconfidence

Corporate internal control, financial mismatch mitigation and innovation performance

Based on the resource allocation optimization theory, from the perspective of internal control (IC) and financial mismatch jointly affecting technological innovation, this study selects the listed enterprises in China's capital market from 2012 to 2020 as the sample, and explores the mechanism among IC, financial mismatch and technological innovation. The results show that effective IC significantly promotes corporate innovation, and mitigates financial mismatch. The mitigation of financial mismatch presents a significant mediating effect between effective IC and innovation output. In Discussion, this study finds that the effects are significantly reflected in non-state-owned enterprises, but not in state-owned enterprises. Finally, it is suggested to improve IC effectiveness continuously, to stimulate innovation vitality, optimize financial resources allocation, and foster new momentum for economic development. And it is suggested to facilitate the transmission effect that effective IC mitigates financial mismatch, and enhances innovation output. Also, the innovation activities in state-owned and non-state-owned enterprises should be coordinated to promote the steady and healthy development of the economy.

Mapping knowledge domains on managerial overconfidence

Managerial overconfidence issues have attracted extant research interest given its influence on corporate strategy and operating performance with the growing development of modern behavioural economics. In this paper, bibliometric tools of VOSviewer and CiteSpace are used to reflect the research trend, hot spots and evolving route of managerial overconfidence theme. The publishing and citation numbers of managerial overconfidence paper are experiencing an overall increasing trend from 1992 to 2021. We sum up the top source journal, institutions, countries and the top 10 highly cited papers, and 272 keywords are distributed in the occurrence graph related to the theme of managerial overconfidence. Twelve keyword clusters from individual, organisational and social levels are identified. The research span is divided into four periods: preliminary, exploratory, growth and outbreak periods, and important research hot spots are summed up with highly cited keywords. The extant literature measurement and variables of managerial overconfidence are summarised in four types, and the integrated research frame of managerial overconfidence is proposed. Future research expansion of managerial overconfidence can be carried out from five aspects of harmony classification, improved measurement, multivariate test, positive paradigm and cultural distinction.

Study on the negative effect of internal-control willingness on enterprise risk-taking

In the traditional cognition, the factors that affect the level of internal control are usually based on the objective factors such as corporate characteristics, financial status, and governance structure. However, the internal control defects of many famous companies expose the phenomenon of subjective manipulation, and this leads us to focus on the subjective factor of internal control, which we call internal-control willingness. We define “internal-control willingness” as the degrees of subjective initiative of the internal-control construction and execution activities. Additionally, we propose a method for measuring internal-control willingness, using text analysis and machine learning. Then, we examine the impact of internal-control willingness on enterprise risk-taking, through the internal-control, financial, and market data of China A-share main board enterprises in 2011–2018. The study found that (1) internal-control willingness has a significant positive impact on internal-control level, which can fairly achieve the measurement of internal-control subjective initiative. (2) It confirms that internal-control willingness lowers corporate risk-taking. (3) Further research finds that state-owned enterprises strengthen internal-control willingness and their risk-taking level is significantly lower than that of non-state-owned enterprises. This paper suggests that the regulatory authorities actively urge the board of directors to strengthen internal-control willingness.

CEOs' Financial Background and Non-financial Enterprises' Shadow Banking Business

In recent years, the "financial-like" behavior of non-financial enterprises has contributed to the "off real to virtual," which has seriously restricted the virtuous cycle of finance and economy. This study selects non-financial enterprises listed on Chinese A-shares from 2008 to 2019 as the research sample, and empirically analyzes the impact of CEOs' financial background (FB) on the shadow banking business of non-financial enterprises and its mechanism. The results show that: (1) CEOs' FB has a positive effect on shadow banking business of non-financial enterprises; among which, the positive effect generated by non-banking FB is stronger. The conclusions still hold after robustness tests by replacing the measurement of variables, controlling for other shocks, changing the parameter estimation method, and considering the endogeneity problem. (2) The mechanism analysis reveals the positive effect mainly by reducing the level of entity investment by enterprises. (3) The heterogeneity analysis finds that, on the one hand, with respect to the internal micro characteristics of enterprises, the positive effect is more significant in state-owned enterprises, non-manufacturing enterprises, and non-growth stage enterprises. On the other hand, with respect to the external macro environment, the positive effect is more significant in periods of easy monetary policy, in industries with a higher competition or in regions with a better institutional environment. This study reveals the intrinsic mechanism of CEOs' FB and non-financial enterprises' shadow banking business, enriches the study of the influencing factors of non-financial enterprises' shadow banking business, and provides micro-level empirical support to alleviate the "off real to virtual" of the economy.