The Relationship Between Managerial Overconfidence and Financial Leverage Among State Corporations Listed at the Nairobi Securities Exchange, Kenya

Abstract

The nexus between managerial overconfidence and financial leverage among state corporations listed at the NSE, Kenya was explored in this inquiry. Descriptive survey and correlational design were adopted targeting seven listed State Corporations and census was adopted. Information was obtained from auxiliary sources of 5 years (2017-2021). SPSS tool was critical in processing the evidence supported by means and standard deviations, correlation and regression model. Tables were handy in presentation of results. It was noted that managerial overconfidence, asset tangibility, firm profitability and firm size all had p-values (p<0.05), implying that they were significant predictors of financial leverage. It was concluded that highly overconfident managers may not necessarily require debts in order to finance the risky investment projects they undertake. It was recommended that te investment and finance managers working in state corporations in Kenya need to undertake more risky projects that would generate more returns for the shareholders. The policy makers working among the listed state corporations in Kenya should formulate and implement relevant debt management policies.