Managerial overconfidence in capital structure decisions and its link to aggregate demand: An agent-based model perspective.

ABSTRACT:

Objective

This study aims to connect two strands of the psychology and economics literature, i.e., behavioural finance and agent-based macroeconomics, to assess the impact of managerial overconfidence at the micro and macro levels of the economy as a whole.

Method

We build a macroeconomic stock-flow consistent agent-based model that is calibrated for the specific case of Poland to explore whether the overconfidence of top corporate managers in the context of their initial capital structure decisions is detrimental for the firms being managed in this way, the financial market dynamics, and the selected macroeconomic indicators. We model heterogeneous firms with different capital structure decision criteria depending on their degree of managerial overconfidence. Our model also

SUBMITTER: Rzeszutek M 

PROVIDER: S-EPMC8376048 | biostudies-literature | 2021

REPOSITORIES: biostudies-literature