The Effect of Behavioral Characteristics of Managers on Corporate Financial Flexibility Moderated by Managing Director’s Efficiency and Political Connections

The behavioral characteristics of managers are among the most crucial factors in making decisions on financing and capital structure of the company. The most important characteristics of managers include optimism, overconfidence, and myopia. Thus, the study investigated the influence of the behavioral characteristics (optimism, overconfidence, and myopia) of managing directors on the financial flexibility of companies with the moderating role of managing directors efficiency and political connections. Accordingly, the data of 130 companies listed in the Tehran Stock Exchange from 2014 to 2018 were examined using multivariate regression. Hypothesis testing revealed that there was no significant relationship between managing directors optimism and the financial flexibility. However, the relationship of managing directors overconfidence and managing directors myopia with financial flexibility was significant and negative. managing directors efficiency moderated the relationship between managing directors overconfidence and financial flexibility, whereas the political connections moderated the relationship between managing directors myopia and financial flexibility.