Author(s) :

Chih-Hsien Chen.

Volume/Issue :

Abstract :

The paper examines the impact of managerial overconfidence on corporate cash holdings in family firms and investigates whether trade policy uncertainty serves as a boundary condition for this relationship. Using a sample of Taiwan-listed family firms from 2017 to 2021, the analysis integrates upper echelons theory with behavioral corporate finance perspectives. Managerial overconfidence is proxied by industry-median-adjusted capital expenditures, and regression analysis is employed to test the proposed relationships empirically. The results reveal a significant negative association between managerial overconfidence and corporate cash holdings, consistent with the overinvestment argument in the behavioral corporate finance literature. By contrast, the interaction between trade policy uncertainty and managerial overconfidence is not statistically significant, indicating that exogenous trade policy uncertainty does not materially alter the relationship between managerial psychological traits and cash holding behavior in the sampled firms. Overall, the paper contributes empirical evidence on the link between managerial psychological characteristics and corporate liquidity decisions.

Keywords :

Family firms, Managerial overconfidence, Cash holdings, Trade policy uncertainty

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