Choi, WonseokChune, Young ChungKim, Kyung Soon2022-11-102022-11-102021-01-15This is the post-print version of an article that is available at https://doi.org/10.1080/13504851.2021.1875116. Recommended citation: Kim, K. S., Choi, W., & Chung, C. Y. (2021). Managerial over-optimism and agency costs of debt: Evidence from high-tech IPO firms in Korea. Applied Economics Letters, 29(6), 545–550. This item has been deposited in accordance with publisher copyright and licensing terms and with the author’s permission.https://hdl.handle.net/11274/14196https://doi.org/10.1080/13504851.2021.1875116We examine whether the combination of agency costs of debt and managerial optimism in high-tech IPOs creates inefficient R&D investment, thus undermining corporate value. We find that high-tech IPO firms with a high debt ratio exhibit a positive relationship between discretionary and future R&D expenses at the IPO point. We also find a negative relationship between discretionary R&D expenses and the long-term cumulative abnormal return. Furthermore, managerial optimism and agency costs of debt can increase during an IPO, reducing future value. Thus, a stock return decrease after an IPO may be influenced by management’s psychological errors and shareholders’ preferences for risky investments.en-USIPOHigh-tech firmDiscretionary R&D expenseManagerial over-optimismAgency cost of debtPost-Print