Top managers’ confidence,ultimate controller and firm value: A study based on empirical analysis and monte carlo simulation

In this paper,making use of the methods of empirical analysis and monte carlo simulation,we study the relationship between top managers’ confidence level and firm value. the empirical study is based on panel data of a shares on shanghai stock exchange,and the results show that the overconfidence of top managers has a significant negative effect on firm value,and this influence is more outstanding in state controlled companies; while top managers’ appropriate confidence has a positive effect on firm value,but ultimate controller type has no significant moderate effect on it. by monte carlo simulation system,we simulate the investment and financing decisions of top managers of different confidence levels,and come along with the conclusion that with the enhancements of top managers’ confidence,the firm value increment would firstly increase and then decrease. this trend shows top managers’ appropriate confidence is conductive to enhance firm value,however overconfidence will cause damage to the firm value. the simulation not only further validates the correctness of our assumptions,but also is a bold attempt to the behavioral corporate finance theory. © 2014 pakistan journal of statistics.