Analysis of the impact of managers' psychological deviation on information disclosure and irrational overseas investment after IFRS convergence

• Published in: Finance research letters Vol. 64; p. 105446
• Main Authors: Zhong, Bin, Soh, Wei Ni, Ong, Tze San, Muhamad, Haslinah, He, ChunXi
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01.06.2024
• Subjects: Behavioral finance; Information disclosure quality; International financial reporting standards (IFRS); Irrational investment; Managers' psychological deviation; Information disclosure quality; International financial reporting standards (IFRS); Managers' psychological deviation; Irrational investment; Behavioral finance
• ISSN: 1544-6123; 1544-6131
• DOI: 10.1016/j.frl.2024.105446

•Based on behavioral finance, the investment phenomenon is discussed from the perspective of managers' psychology.•The relationship between managers' psychological deviation and irrational investment under IFRS was explored.•The moderating role of information disclosure quality between psychological deviation and irrational investment was analyzed.•Suggestions on the relationship between managers, investments, and information disclosure under IFRS were proposed. Based on a sample of 6485 firms listed on the Chinese Shanghai and Shenzhen A-shares between 2017 and 2021, the effect of managers' psychological deviation on irrational investment is empirically tested. The higher the managers’ confidence, the lower the investment efficiency. The level of irrational investment in listed companies increases with the degree of managers’ risk appetite. The improvement of disclosure quality of enterprises after IFRS convergence in China can weaken irrational investment triggered by managers' overconfidence. The information disclosure quality by companies can manage the irrational investment behavior that is exacerbated by the high degree of managers’ risk appetite.