The Impact of Overconfidence on Capital Structure in Tehran Stock Exchange

The aim of this study is to investigate the relationship between the overconfidence and capital structure in companies listed on Tehran stock Exchange (TSE). In addition to management confidence, the impact of the fundamental factors on the market leverage is analyzed. The annual data of 690 firm/year on the Tehran stock Exchange for the period between April 2010 - March 2015 is used for the analysis by means of the ordinary least squares regression model.The results show that the significant positive relationship between overconfidence and leverage. There is enough evidence for the ideas of overconfident managers tend to use more debt level.In addition, the results show that among market to book ratio (MB), size, tangibility and profitability factors, only MB and size significantly affect leverage.

Keywords:

Managerial overconfidence , behavioral finance , Capital structure , Leverage