Business Strategy, Overconfidence and Investment Efficiency

This study examines the effects of Bentley et al. (2013)'s management strategy (prospectors, analysts, and defenders) and managerial tendency on investment efficiency. The results of this study are as follows. Prospectors appear to have lower investment efficiency than analysts and defenders. On the other hand, companies pursuing analytical strategies have higher investment efficiency than those that do not. Second, if managers of prospectors are overconfident, companies appear to have lower investment efficiency due to optimistic expectations for the future. In addition, prospectors tend to overinvest, and defenders tend to underinvest. The contributions of this study are as follows. First, the relationship between the investment efficiency of a company was verified by participants in the capital market according to the manager's overconfidence tendency and management strategy. The second is that it systematically proved and presented to participants in the capital market that appropriate investment management is important in leading companies, including the characteristics of companies in the early stages of start-up. Finally, it presents a logical basis that investment efficiency management can be essential in corporate management.