To see the other types of publications on this topic, follow the link: Optimism and overconfidence.
Journal articles on the topic 'Optimism and overconfidence'
Create a spot-on reference in APA, MLA, Chicago, Harvard, and other styles
Consult the top 50 journal articles for your research on the topic 'Optimism and overconfidence.'
Next to every source in the list of references, there is an 'Add to bibliography' button. Press on it, and we will generate automatically the bibliographic reference to the chosen work in the citation style you need: APA, MLA, Harvard, Chicago, Vancouver, etc.
You can also download the full text of the academic publication as pdf and read online its abstract whenever available in the metadata.
Browse journal articles on a wide variety of disciplines and organise your bibliography correctly.
1
Pandit, Kul Chandra. "Trading practice and Behavioral Biases of Individual Investors in Nepalese Stock Market." Nepalese Journal of Management Research 1 (January 31, 2021): 55–62. http://dx.doi.org/10.3126/njmgtres.v1i0.37323.
Full textAbstract:
The paper was based on survey research design. There is significant association between experience group with herding bias and optimism bias and there is no significant association between experience group with investment decision bias, disposition effect bias, and overconfidence bias. Similarly there is significant association between trading frequency with herding bias, optimism bias, investment decision bias, disposition effect bias, and overconfidence bias. Heuristics may make investors overconfident as they overlook risks causing security price to move away from fundamentals. Investors tend to be overconfident and hence overestimate the accuracy of their forecast due to illusion of knowledge and illusion of control.
2
Trevelyan, Rose. "Optimism, overconfidence and entrepreneurial activity." Management Decision 46, no. 7 (August 1, 2008): 986–1001. http://dx.doi.org/10.1108/00251740810890177.
Full textAbstract:
PurposeThis paper aims to explore the question of confidence in entrepreneurship, and the impact confidence has on key tasks in the venture development process.Design/methodology/approachPropositions about the relationship between key elements of confidence (optimism and overconfidence) are made in order to unpack the confidence construct. Simple tests of these propositions are conducted using a small sample of Australian entrepreneurs. Further propositions are made about the impact of optimism and overconfidence on activity across different phases of the new venture development process.FindingsTwo elements of confidence, optimism and overconfidence, are distinct in their association with each other and with a third individual difference (regulatory focus). The dual and sometimes opposing impacts of optimism and overconfidence on new venture activity are explored. Optimism and overconfidence are both beneficial when deciding to become an entrepreneur, but overconfidence is harmful when making decisions in response to setbacks.Research limitations/implicationsConclusions are limited by the sample size and simple analytical techniques. Rather, the impact of the paper is in the implications of the independence of optimism and overconfidence. Future research can explore and test the propositions made about when each is harmful and when beneficial.Practical implicationsFor entrepreneurs, it is important to be aware of your optimism and overconfidence in different situations. When optimism is beneficial, use it, but when overconfidence is harmful, mitigate against it by asking the right questions and working with others to check assumptions and strategies.Originality/valueThis paper distinguishes between two individual differences, optimism and overconfidence, that are typically thought to be interdependent and beneficial for entrepreneurs.
3
Bernoster, Indy, Cornelius Rietveld, A. Thurik, and Olivier Torrès. "Overconfidence, Optimism and Entrepreneurship." Sustainability 10, no. 7 (June 28, 2018): 2233. http://dx.doi.org/10.3390/su10072233.
Full text
4
Zhao, Qiuhong, and Dave A. Ziebart. "Consequences of CEO Overconfidence." Accounting and Finance Research 6, no. 2 (March 29, 2017): 94. http://dx.doi.org/10.5430/afr.v6n2p94.
Full textAbstract:
We test the impact of CEO overconfidence on the cost of debt and the impact of SOX on overconfidence via CEO selection. Our CEO overconfidence measure is based on the degree of optimism in management earnings forecasts, and the measure for the cost of debt is bond yield spreads. Our evidence supports that the market discounts CEO overconfidence by increasing the cost of borrowing. Moreover, we find that the financial market also incorporates past CEO overconfidence into bond pricing. We document that the board prefers to appoint a more rational CEO over an overconfident CEO. Our findings are consistent with Banerjee et al.’s (2015) argument that an independent board mitigates the costs of CEO overconfidence in terms of investment and risk exposure.
5
Park, Kyung-Hee, Jinho Byun, and Paul Moon Sub Choi. "Managerial Overconfidence, Corporate Social Responsibility Activities, and Financial Constraints." Sustainability 12, no. 1 (December 19, 2019): 61. http://dx.doi.org/10.3390/su12010061.
Full textAbstract:
Managerial overconfidence refers to managers’ cognitive bias, according to which they demonstrate unwarranted belief in their own judgments and capabilities. This study provides a new measurement of CEO overconfidence through textual analysis of management discussion and analysis (MD&A) in 10-K documents by making use of the US Securities and Exchange Commission (SEC) EDGAR database. Overconfidence was obtained from “optimism” using the Diction program. From a sample of 19,367 US firms from 1994 to 2016, we found that CEO overconfidence was negatively related to corporate social responsibility (CSR) activities. Since overconfident CEOs are likely to consider CSR activities less important than their own ability, they seem to reduce CSR activities. Also, CSR activities initiated by overconfident CEOs were negatively related to firms’ long-term performance. However, CSR activities led to positive long-term performance in firms that were financially constrained. Our findings show that CSR activities undertaken as a result of CEO overconfidence by financially unconstrained firms could be harmful to shareholder value in the long term.
6
Dubra, Juan. "Optimism and overconfidence in search." Review of Economic Dynamics 7, no. 1 (January 2004): 198–218. http://dx.doi.org/10.1016/s1094-2025(03)00036-x.
Full text
7
Islam Khan, Mohammad Tariqul, Siow-Hooi Tan, and Lee-Lee Chong. "The effects of stated preferences for firm characteristics, optimism and overconfidence on trading activities." International Journal of Bank Marketing 34, no. 7 (October 3, 2016): 1114–30. http://dx.doi.org/10.1108/ijbm-10-2015-0154.
Full textAbstract:
Purpose The purpose of this paper is to test the competing explanations of stated preferences for firm characteristics, optimism and overconfidence for trading activities in a single framework. Design/methodology/approach A survey methodology is followed to collect the data among retail investors in Malaysia using simple random sampling. Findings The findings show simultaneous identification of stated preferences for firm characteristics, optimism and overconfidence as determinants of trading activities. Preferences for firm’s profitability characteristics, management and product-related attributes and risky characteristics are likely to decrease investors’ trading activities. On the other hand, preferences for firm’s liquidity and trading volume characteristics with relative financial-domain optimism, personal investment optimism and better-than-average aspect of overconfidence are likely to increase investors’ trading activities. Practical implications This finding implies that investors should be careful not only in assessing firm’s characteristics but also need to understand the effects of optimism and overconfidence in trading decisions. Originality/value The study considers various aspects of optimism and overconfidence, and the stated preferences for firm characteristics, unlike one aspect of these behavioral biases and indirect observation of preferences for firm characteristics. Furthermore, the study considers trading frequency, annual portfolio turnover and trading intention, whereas earlier studies considered only one or two of these trading decisions.
8
Johnson, Dominic D. P., Rose McDermott, Emily S. Barrett, Jonathan Cowden, Richard Wrangham, Matthew H. McIntyre, and Stephen Peter Rosen. "Overconfidence in wargames: experimental evidence on expectations, aggression, gender and testosterone." Proceedings of the Royal Society B: Biological Sciences 273, no. 1600 (June 20, 2006): 2513–20. http://dx.doi.org/10.1098/rspb.2006.3606.
Full textAbstract:
Summary Overconfidence has long been noted by historians and political scientists as a major cause of war. However, the origins of such overconfidence, and sources of variation, remain poorly understood. Mounting empirical studies now show that mentally healthy people tend to exhibit psychological biases that encourage optimism, collectively known as ‘positive illusions’. Positive illusions are thought to have been adaptive in our evolutionary past because they served to cope with adversity, harden resolve, or bluff opponents. Today, however, positive illusions may contribute to costly conflicts and wars. Testosterone has been proposed as a proximate mediator of positive illusions, given its role in promoting dominance and challenge behaviour, particularly in men. To date, no studies have attempted to link overconfidence, decisions about war, gender, and testosterone. Here we report that, in experimental wargames: (i) people are overconfident about their expectations of success; (ii) those who are more overconfident are more likely to attack; (iii) overconfidence and attacks are more pronounced among males than females; and (iv) testosterone is related to expectations of success, but not within gender, so its influence on overconfidence cannot be distinguished from any other gender specific factor. Overall, these results constitute the first empirical support of recent theoretical work linking overconfidence and war.
9
Giacomin, Olivier, Frank Janssen, and Rachel S. Shinnar. "University Students and their faculty: Perceptions of entrepreneurial optimism, overconfidence and entrepreneurial Intentions." Management international 20, no. 1 (May 4, 2018): 123–34. http://dx.doi.org/10.7202/1045360ar.
Full textAbstract:
While an entrepreneurial career requires some level of optimism and confidence, unfounded optimism and overconfidence can be detrimental to entrepreneurial success. By comparing student and faculty perceptual differences, we assess whether university students are overly optimistic regarding the outcomes they expect from an entrepreneurial career as well as overconfident in their perceptions of barriers to entrepreneurship. Findings suggest that, overall, students are more optimistic but not more confident than faculty. Also, students who are more optimistic and more confident than their faculty, also perceive themselves to be more entrepreneurial and have stronger entrepreneurial intentions than their peers.
10
Giacomin, Olivier, Frank Janssen, and Rachel S. Shinnar. "Student entrepreneurial optimism and overconfidence across cultures." International Small Business Journal: Researching Entrepreneurship 34, no. 7 (October 21, 2016): 925–47. http://dx.doi.org/10.1177/0266242616630356.
Full text
11
Kinari, Yusuke. "Properties of expectation biases: Optimism and overconfidence." Journal of Behavioral and Experimental Finance 10 (June 2016): 32–49. http://dx.doi.org/10.1016/j.jbef.2016.02.003.
Full text
12
Krause, Robert. "PERSONALITY VARIABLES IN RELATION TO THE EFFECT OF FEEDBACK ON THE EFFECT OF OVERCONFIDENCE." Problems of Education in the 21st Century 79, no. 4 (August 10, 2021): 597–610. http://dx.doi.org/10.33225/pec/21.79.597.
Full textAbstract:
This research examined which personality variables potentially moderated the effect of feedback on the Overconfidence effect. Research sample consisted of Slovak teachers (n = 223) from across school levels, who were randomly allocated into one of the three groups, out of which two were experimental and one was control. Each group of participants filled in three personality questionnaires, the Reading Literacy Test, and questions on the Overconfidence effect. The first experimental group was given a real feedback on their achieved performance, the second experimental group was given an inaccurate feedback and the control group did not receive any feedback. It was pointed out that despite high mutual correlation between chosen personality variables, no relation was demonstrated between the Overconfidence effect and optimism, neuroticism, or participant’s self-evaluation. The results show that the impact of real feedback on the Overestimation effect depends on the level of neuroticism. Results suggested that the type of feedback on the Overconfidence effect is not moderated by the level of optimism. At the same time, the impact of real feedback on the Overconfidence effect is partially moderated by the level of self-evaluation and the impact of inaccurate feedback on the Overconfidence effect is not moderated by the level of self-evaluation. Keywords: moderation analysis, overconfidence effect, effect of experience, personality variables
13
Fabre, Bruno, and Alain François-Heude. "Optimism and overconfidence investors' biases: a methodological note." Finance 30, no. 1 (2009): 79. http://dx.doi.org/10.3917/fina.301.0079.
Full text
14
Azouzi, Mohamed Ali, and Anis Jarboui. "CEO emotional bias and investment decision Bayesian Network method." Corporate Ownership and Control 9, no. 2 (2012): 239–56. http://dx.doi.org/10.22495/cocv9i2c2art1.
Full textAbstract:
This research examines the determinants of firms’ investment introducing a behavioral perspective that has received little attention in corporate finance literature. The following central hypothesis emerges from a set of recently developed theories: Investment decisions are influenced not only by their fundamentals but also depend on different factors. One factor is the biasness of any CEO to their investment, biasness depends on the cognition and emotions, because some leaders use them as heuristic for the investment decision instead of fundamentals. Keeping this in view, this paper shows how CEO emotional bias (optimism, loss aversion and overconfidence) effects the investment decisions. I will use Bayesian Network Method to examine this relation. Emotional bias has been measured by means of a questionnaire comprising several items. As for the selected sample, it has been composed of some100 Tunisian executives. Our results have revealed that the behavioral analysis of investment decision implies leader affected by behavioral biases (optimism, loss aversion, and overconfidence) adjusts its investment choices based on their ability to assess alternatives (optimism and overconfidence) and risk perception (loss aversion) to create of shareholder value and ensure its place at the head of the management team.
15
Capps, Gregory, Lisa Koonce, and Kathy R. Petroni. "Natural Optimism in Financial Reporting: A State of Mind." Accounting Horizons 30, no. 1 (September 1, 2015): 79–91. http://dx.doi.org/10.2308/acch-51277.
Full textAbstract:
SYNOPSIS The objective of this paper is to cohesively introduce the notion of natural optimism into the accounting literature and to provide insights into the role of natural optimism in financial reporting on the part of firm managers. To accomplish this, we first discuss the research that demonstrates that optimism is the natural state of mind for most people and therefore we posit that firm managers involved in preparing financial statements are likely to exhibit naturally occurring optimism. Second, we identify where natural optimism is most likely to have an impact on financial reporting. Third, we address the challenges involved with mitigating or eliminating natural optimism in financial reporting. Finally, we address the relationship between optimism and two other constructs often found in accounting—namely, overconfidence and motivated reasoning.
16
Oyeku, Oyedele M., Oduyoye Oluseyi, Funmilayo Ajoke Karimu, F. Akinfolarin Akindoju, Falilu Oladeji Agbetokun, and G. N. Elemo. "On Whether Entrepreneurial Self Efficacy Is A Predictor Of Entrepreneurial Success." Archives of Business Research 8, no. 7 (August 4, 2020): 158–70. http://dx.doi.org/10.14738/abr.87.8661.
Full textAbstract:
The objective of this study is to examine the effect of entrepreneurial self efficacy on entrepreneurial success. 9,450 small and medium enterprises (SMEs) who are registered members of the National Association of Small and Medium Enterprises (NASME), National Association of Small Scale Industrialists (NASSI) and Association of Small Business Owners in Nigeria (ASBON) in Lagos State is the sample population. Probability sampling technique, specifically, proportionate stratified random sampling method was used to select samples from the sampling frame. The formula developed by the National Education Association (1960) was used to determine the sample size of 381 was used for this study. Primary data on the dependent variable (Entrepreneurial success) and independent variable (Entrepreneurial orientation) was collected using questionnaire as research instrument. Entrepreneurial self efficacy measures are optimism and overconfidence while measures for entrepreneurial success are profitability, market share, net asset growth, sales growth and government policies. The questionnaire was pretested by a pilot study of 50 selected SMEs. Data obtained from the pilot study was analyzed and based on the result, the questionnaire was slightly modified giving an overall Cronbach’s Alpha value of 0.853. The statistics of the model summary of the correlation co-efficient reveal that: R = .232 showing that the combined influence of the two predictor variables had a moderate positive relationship with entrepreneurial success. The coefficient of determination R square is .054 or 5.4%. This suggests that the combined influence of the predictor variables (optimism and overconfidence) explains 5.4% of the variations in entrepreneurial success of SMEs. The value of F (2,207) = 5.866, p <.05, shows that the combined effect of optimism and overconfidence was statistically significant in explaining changes in entrepreneurial success of SMEs in Lagos State. This is established by a p value of 0.003 which is less than the acceptance critical value of 0.05. The findings of the study reveal that entrepreneurs’ optimism had the highest influence on entrepreneurial success because the p value was 0.040 and then entrepreneurs’ overconfidence with 0.201. These findings may be of help to the owner/managers of SMEs to be more entrepreneurial optimistic in order for them to survive the intensely competitive market environment.
17
Metcalfe, Janet. "Cognitive Optimism: Self-Deception or Memory-Based Processing Heuristics?" Personality and Social Psychology Review 2, no. 2 (May 1998): 100–110. http://dx.doi.org/10.1207/s15327957pspr0202_3.
Full textAbstract:
In a wide variety of cognitive tasks, people's expectations of what their own performance is, was, and will be are an overestimate of reality. After documenting a number of situations in which people exhibit such overconfidence, several reasons for it are discussed. It is suggested that in these situations, the optimistic bias is not attributable exclusively to self-deception or wishful thinking. Rather, the information yielded up by the cognitive system, in combination with the heuristics used for making judgments of future and past performance tailored to the specific questions asked of participants, produces a bias toward believing that one knows, knew, and will perform better than actual performance substantiates. Consequently, in the cognitive domain, the inflated beliefs that result in overconfidence also result in cessation of efforts before the correct solution of problems is ascertained, before accurate retrieval of memorial information is attained, or before adequate learning of new material has been accomplished. This effect seems in contrast to findings on people's moods and self-esteem in real-world or threatening situations that suggest that an optimistic bias in these domains be person protective and adaptive.
18
Irum Saba, Maria Shams Khakwani, Rehana Kouser, and Abdul Wahab. "Investor Sentiments and Trading Volume’s Asymmetric Response: a Non-linear ARDL Approach Tested in PSX." Journal of Accounting and Finance in Emerging Economies 5, no. 1 (June 30, 2019): 47–56. http://dx.doi.org/10.26710/jafee.v5i1.720.
Full textAbstract:
The research paper entitled “Investor sentiments and trading volume’s asymmetric response: A non linear ARDL approach tested in PSX” is an attempt to investigate the dynamic linkages between trading volume and investor sentiments for Pakistan Stock Exchange (PSX) 100 index. Two sentiments indicators have been used to enlighten the linkages. These indicators are overconfidence and net optimism and pessimism. Trading volume has been used as a proxy for the measurement of market liquidity. Non-Linear Asymmetric Autoregressive Distributed Lag (NARDL) as well as Dynamic Conditional Correlation (DCC) GARCH have been used to explain the dynamic linkages between trading volume and investor sentiments. Empirical findings suggested an asymmetric long-term market liquidity reaction to investor sentiment as well as upcoming three-year correlation have been forecasted between the trading volume and investor sentiments. In the short term, stock market liquidity reacts rapidly and asymmetrically to changes in overconfidence sentiment while the net optimism and pessimism sentiment have insignificant short-term impact on trading volume.
19
Lim, David Rimbo, Hendrawan Supratikno, Gracia Shinta S. Ugut, and Edison Hulu. "Causative dynamics of overconfidence, optimism, framing effects and demographic attributes as capital structure determinants for publicly listed firms in Indonesia." Accounting 8, no. 2 (2022): 123–38. http://dx.doi.org/10.5267/j.ac.2021.7.009.
Full textAbstract:
This study examines whether capital structure determinations by Indonesian publicly listed firms (Tbks) are influenced by the behavioural biases of overconfidence and optimism, with the underlying rationality frameworks being framed by relevant financial information and impacted by decision-makers’ demographic attributes. Data were obtained from survey respondents and statistically analysed using partial least squares structural equation modelling to identify the indicators of causative dynamics within the hypothesised relationships. Sampled Tbks’ management (CEOs/CFOs) displayed the inherent behavioural traits of overconfidence and optimism in their capital structure determinations. However, such behavioural variables were not statistically proven to significantly influence capital structure decision-making and, hence, were not validated as capital structure determinants. The pecking order framework was revealed to have a significant framing effect on capital structure decision-making by sampled managers. Sampled managers’ demographic attributes and backgrounds were found to be capital structure determinants but did not have a mediating or moderating influence on the modelled relationship between behavioural variables and capital structure.
20
Muir, Clive. "Knowing When to Quit: Do Optimism and Overconfidence Cloud Inventor Judgment?" Academy of Management Perspectives 21, no. 4 (November 2007): 78–80. http://dx.doi.org/10.5465/amp.2007.27895342.
Full text
21
Antonczyk, Ron Christian, and Astrid Juliane Salzmann. "Overconfidence and optimism: The effect of national culture on capital structure." Research in International Business and Finance 31 (May 2014): 132–51. http://dx.doi.org/10.1016/j.ribaf.2013.06.005.
Full text
22
Johnson, Dominic D. P., and Dominic Tierney. "The Rubicon Theory of War: How the Path to Conflict Reaches the Point of No Return." International Security 36, no. 1 (July 2011): 7–40. http://dx.doi.org/10.1162/isec_a_00043.
Full textAbstract:
A major paradox in international relations is the widespread fear and anxiety that underlies the security dilemma in times of peace and the prevalence of overconfidence or “false optimism” on the eve of war. A new theory of the causes of war—the Rubicon theory of war—can account for this paradox and explain important historical puzzles. The “Rubicon model of action phases,” which was developed in experimental psychology, describes a significant shift in people's susceptibility to psychological biases before and after making a decision. Prior to making decisions, people tend to maintain a “deliberative” mind-set, weighing the costs, benefits, and risks of different options in a relatively impartial manner. By contrast, after making a decision, people tend to switch into an “implemental” mind-set that triggers a set of powerful psychological biases, including closed-mindedness, biased information processing, cognitive dissonance, self-serving evaluations, the illusion of control, and optimism. Together, these biases lead to significant overconfidence. The Rubicon theory of war applies this model to the realm of international conflict, where implemental mind-sets can narrow the range of bargaining options, promote overambitious war plans, and elevate the probability of war.
23
Heger, Stephanie A., and Nicholas W. Papageorge. "We should totally open a restaurant: How optimism and overconfidence affect beliefs." Journal of Economic Psychology 67 (August 2018): 177–90. http://dx.doi.org/10.1016/j.joep.2018.06.006.
Full text
24
Vuong, Quan Duc Hoang, and Phuc Quy Dao. "AN EMPIRICAL STUDY OF INDIVIDUAL INVESTORS’ BEHAVIORAL BIASES IN THE VIETNAMESE STOCK MARKET." Science and Technology Development Journal 15, no. 1 (March 30, 2012): 5–13. http://dx.doi.org/10.32508/stdj.v15i1.1779.
Full textAbstract:
The study aims to determine individual investors’ behavioral biases at individual level in the Vietnamese stock market and investigate the relationships between mutual behavioral biases, between demographic variables and behavioral biases, between stock investment variables and behavioral biases. This is a quantitative research in behavioral finance with the survey conducted in forms of questionnaire. Each question is a problem which requires investors to make decision. The research finds out that there are specific behavioral biases which influence investors’ investment decisions. Furthermore, there are relationships between gender and illusion of control bias, gender and optimism bias, gender and self-control bias. We also realize relationships between average value per trading times and investment experience, average value per trading times and loss aversion bias, trading frequency and optimism bias, investment experience and optimism bias, monthly income and optimism, age and cognitive dissonance bias. Our findings confirm relationships between mutual behavioral biases mentioned in behavioral finance such as relationships between framing bias and mental accounting bias, illusion of control bias and overconfidence bias. Additionally, we find out relationships between ambiguity aversion bias and confirmation bias.
25
Iqbal, Nadeem, and Sajid Iqbal. "Investor Behavior & Fundamental Analysis: A Case of Karachi Stock Exchange Investor’s." International Letters of Social and Humanistic Sciences 59 (September 2015): 85–88. http://dx.doi.org/10.18052/www.scipress.com/ilshs.59.85.
Full textAbstract:
The current study hypothesized the investor behaviors with stock market fundamental analysis. Thus, the study used convinance and simple random sampling for data acquisition and study has used descriptive, correlation regression and combined effect t tests to interpret the data. And have concluded that facets of investor behavior i-e overconfidence, optimism, involvement and risk behavior has significant relation with stock market fundamental analysis. Hence, study concluded its finding up to historic investigations.
26
Chochoiek, Nadine Alexandra, Laura Rosendahl Huber, and Randolph Sloof. "Optimism & Overconfidence in Strategic Decision Making - Are Managers & Entrepreneurs Really Different?" Academy of Management Proceedings 2020, no. 1 (August 2020): 11523. http://dx.doi.org/10.5465/ambpp.2020.11523abstract.
Full text
27
Abdeldayem, Marwan M., and Doaa S. Sedeek. "Managerial Behavior and Capital Structure Decisions; Do Overconfidence, Optimism and Risk Aversion Matter?" Asian Economic and Financial Review 8, no. 7 (2018): 925–45. http://dx.doi.org/10.18488/journal.aefr.2018.87.925.945.
Full text
28
Belizan, Maria, Juan P. Alonso, Analía Nejamis, Joaquín Caporale, Mariano G. Copo, Mario Sánchez, Adolfo Rubinstein, and Vilma Irazola. "Barriers to hypertension and diabetes management in primary health care in Argentina: qualitative research based on a behavioral economics approach." Translational Behavioral Medicine 10, no. 3 (April 4, 2019): 741–50. http://dx.doi.org/10.1093/tbm/ibz040.
Full textAbstract:
Abstract Despite efforts to improve detection and treatment of adults with hypertension and diabetes in Argentina, many public healthcare system users remain undiagnosed or face barriers in managing these diseases. The purpose of this study is to identify health system, provider, and user-related factors that may hinder detection and treatment of hypertension and diabetes using a traditional and behavioral economics approach. We did qualitative research using in-depth semistructured interviews and focus groups with healthcare providers and adult users of Public Primary Care Clinics. Health system barriers included inadequate care accessibility; poor integration between primary care clinics and local hospitals; lack of resources; and gender bias and neglect of adult chronic disease. Healthcare provider–related barriers were inadequate training; lack of availability or reluctance to adopt Clinical Practice Guidelines; and lack of counseling prioritization. From a behavioral economics perspective, bottlenecks were related to inertia and a status quo, overconfidence, and optimism biases. User-related barriers for treatment adherence included lack of accurate information; resistance to adopt lifelong treatment; affordability; and medical advice mistrust. From a behavioral economics perspective, the most significant bottlenecks were overconfidence and optimism, limited attention, and present biases. Based on these findings, new interventions that aim to improve prevention and control of chronic conditions can be proposed. The study provides empirical evidence regarding the barriers and bottlenecks in managing chronic conditions in primary healthcare settings. Results may contribute to the design of behavioral interventions targeted towards healthcare provision for the affected population.
29
Hidajat, Taofik. "BEHAVIOURAL BIASES IN BITCOIN TRADING." Fokus Ekonomi : Jurnal Ilmiah Ekonomi 14, no. 2 (December 8, 2019): 337–54. http://dx.doi.org/10.34152/fe.14.2.337-354.
Full textAbstract:
This paper aims to propose some behavioural biases of trading in Bitcoin. It is review literature in the areas of behavioural finance that address issues related to Bitcoin to underpin the conceptual model. A conceptual model for understanding the behavioural bias that affects investing in cryptocurrency is proposed. The biases are herding, optimism, overconfidence, confirmation bias, loss aversion, and gamblers’ fallacy. This paper ought to fill the research gap on cryptocurrency from the behavioral perspective. This paper implies that prices and Bitcoin transactions are more determined by psychological factors.
30
Abul, Sadeq J. "Factors influencing Individual Investor Behaviour: Evidence from the Kuwait Stock Exchange." Asian Social Science 15, no. 3 (February 28, 2019): 27. http://dx.doi.org/10.5539/ass.v15n3p27.
Full textAbstract:
This study investigates the effects of psychological factors on investor behaviour regarding the Kuwait Stock Exchange (KSE). These psychological factors are, namely: excessive optimism vs pessimism, herd behaviour and risk appetite. The data for this study obtained from KSE and a survey of a random sample of 398 individual investors. By using qualitative analysis and based on the theory of behavioural finance, the study findings show that herd behaviour, optimism and psychology risk have an impact on the individual investors’ decisions. However, we did not find any evidence of overconfidence behaviour’s effects on investors’ decisions. To our knowledge, KSE has been examined by several researchers without taking into consideration the effects of psychological factors on individual investor decisions. This study finds that psychological factors play a significant role in individual investors’ decisions regarding KSE. This study might contribute positively to the development of this field of research in (KSE).
31
Barros, Lucas Ayres B. de C., and Alexandre Di Miceli da Silveira. "Excesso de confiança, otimismo gerencial e os determinantes da estrutura de capital." Brazilian Review of Finance 6, no. 3 (January 2, 2008): 293. http://dx.doi.org/10.12660/rbfin.v6n3.2008.1343.
Full textAbstract:
This research examines the determinants of the capital structure of firms introducing a behavioral perspective that has received little attention in corporate finance literature. The following central hypothesis emerges from a set of recently developed theories: firms managed by optimistic and/or overconfident people will choose more levered financing structures than others, ceteris paribus. We propose different proxies for optimism/overconfidence, based on the manager’s status as an entrepreneur or non-entrepreneur, an idea that is supported by theories and solid empirical evidence, as well as on the pattern of ownership of the firm’s shares by its manager. The study also includes potential determinants of capital structure used in earlier research. We use a sample of Brazilian firms listed in the Sao Paulo Stock Exchange (Bovespa) in the years 1998 to 2003. The empirical analysis suggests that the proxies for the referred cognitive biases are important determinants of capital structure. We also found as relevant explanatory variables: profitability, size, dividend payment and tangibility, as well as some indicators that capture the firms’ corporate governance standards. These results suggest that behavioral approaches based on human psychology research can offer relevant contributions to the understanding of corporate decision making.
32
DÖLARSLAN, EMRE ŞAHIN, AKIN KOÇAK, and ALPER ÖZER. "“BATS ARE BLIND?” COGNITIVE BIASES IN RISK PERCEPTION OF ENTREPRENEURS." Journal of Developmental Entrepreneurship 22, no. 03 (September 2017): 1750021. http://dx.doi.org/10.1142/s1084946717500212.
Full textAbstract:
In general, it could be said that bats are blind but they have high quality senses of smelling and hearing to survive. Similarly, entrepreneurs can look at the business world with different eyes to survive. This affects their cognitive biases in risk perception. The aim of this study was to analyze how entrepreneurs’ cognitive biases affect their opportunity exploitation and risk perception. In this study, we evaluated self-efficacy, locus of control, overconfidence and optimism as dimensions of cognition. Independently of our purpose, results also show entrepreneurs have social capital, such as experience and prior knowledge, which forms their cognitive biases and leads them to perceive less risk when evaluating a new venture idea.
33
Bashir, Taqadus, Faisal Mehmood, and Altamash Khan. "Comforting Investments are Rarely Profitable: Impediments in Investor Decision Making." Global Social Sciences Review IV, no. II (April 23, 2019): 51–59. http://dx.doi.org/10.31703/gssr.2019(iv-ii).07.
Full textAbstract:
This research aims at testing and confirming existence of selected behavioral biases of investors that affect their decisions. Five behavioral biases affecting irrational behavior of investors were selected: overconfidence bias, illusion of control bias, confirmation bias and recency bias and optimism bias. Primary data was collected through a questionnaire from 300 investors from banks, insurance companies, stock exchanges etc. The results were obtained by employing a correlation and regression analysis for the presence of behavioral biases and to detect degrees of their influence on decision making. Correlation results indicate moderate association between behavioral biases and decisions of investors. Outcome of the research indicates that while making financial decisions investors are moderately affected by behavioral biases.
34
Zelienková, Andrea. "Impact of positive illusions and experience on decision to invest in own new venture." Ceskoslovenska psychologie 65, no. 3 (June 30, 2021): 269–85. http://dx.doi.org/10.51561/cspsych.65.2.269.
Full textAbstract:
Objectives. The objective of this study is threefold: 1) to examine the effect of positive illusions on risk taking manifested in opportunity evaluation and investment decision; 2) to examine the mediating role of risk attitudes on the relationship between positive illusions and risk taking manifested in opportunity evaluation and investment decision; 3) to examine the moderating effect of experience on the relationship between positive illusions and risk taking manifested in opportunity evaluation and investment decision. Sample and setting. Research sample comprised 132 entrepreneurs aged between 19 and 63 (M = 40.6; SD = 10.8) owning small, medium, and large-sized businesses. Hypotheses. 1) Individuals exhibiting higher positive illusions (overconfidence, unrealistic optimism, illusion of control) would take higher risk manifested in opportunity evaluation and investment decision. 2) Risk attitudes will mediate the relationship between positive illusions and risk taking manifested in opportunity evaluation and investment decision. 3) Experience will moderate the relationship between positive illusions and risk taking manifested in opportunity evaluation and investment decision. Statistical analysis and results. 1) Using simple linear regression it was found that only unrealistic optimism for rare positive events and illusion of control predicted risk taking manifested in investment decision. None of positive illusions explained opportunity evaluation. 2) Using PROCESS macro for mediation analysis it was found that domain-specific risk perception, rather than general risk tolerance, is statistically significant mediator of the relationship between unrealistic optimism for rare positive events and investment decision. 3) Moderation analysis via PROCESS macro showed that only entrepreneurial experience moderates the relationship between unrealistic optimism for rare positive events and investment decision using own savings. The limitations concerning gender and domain specificity of methods are discussed in the study.
35
Zelienková, Andrea. "Impact of positive illusions and experience on decision to invest in own new venture." Ceskoslovenska psychologie 65, no. 3 (June 30, 2021): 269–85. http://dx.doi.org/10.51561/cspsych.65.3.269.
Full textAbstract:
Objectives. The objective of this study is threefold: 1) to examine the effect of positive illusions on risk taking manifested in opportunity evaluation and investment decision; 2) to examine the mediating role of risk attitudes on the relationship between positive illusions and risk taking manifested in opportunity evaluation and investment decision; 3) to examine the moderating effect of experience on the relationship between positive illusions and risk taking manifested in opportunity evaluation and investment decision. Sample and setting. Research sample comprised 132 entrepreneurs aged between 19 and 63 (M = 40.6; SD = 10.8) owning small, medium, and large-sized businesses. Hypotheses. 1) Individuals exhibiting higher positive illusions (overconfidence, unrealistic optimism, illusion of control) would take higher risk manifested in opportunity evaluation and investment decision. 2) Risk attitudes will mediate the relationship between positive illusions and risk taking manifested in opportunity evaluation and investment decision. 3) Experience will moderate the relationship between positive illusions and risk taking manifested in opportunity evaluation and investment decision. Statistical analysis and results. 1) Using simple linear regression it was found that only unrealistic optimism for rare positive events and illusion of control predicted risk taking manifested in investment decision. None of positive illusions explained opportunity evaluation. 2) Using PROCESS macro for mediation analysis it was found that domain-specific risk perception, rather than general risk tolerance, is statistically significant mediator of the relationship between unrealistic optimism for rare positive events and investment decision. 3) Moderation analysis via PROCESS macro showed that only entrepreneurial experience moderates the relationship between unrealistic optimism for rare positive events and investment decision using own savings. The limitations concerning gender and domain specificity of methods are discussed in the study.
36
Tran, Quan Nhu. "The Behavior Patterns of Investors in Thailand Stock Market." Asian Journal of Finance & Accounting 9, no. 1 (February 26, 2017): 155. http://dx.doi.org/10.5296/ajfa.v9i1.10605.
Full textAbstract:
The purpose of this paper is to investigate behavioral patterns expressed by investors in the Thailand stock market. The paper examines investment decision-making processes in the context of the current financial market in Thailand to shed some light on behavioral-induced pattern behind such investments. Data for this research was collated from 8 individual investors by semi-structured and in-depth interview. There are four behavioral factors of individual investors in Thailand Stock Exchange: Overconfidence, Excessive Optimism, Psychology of risk, and Herding Behavior. Securities Companies may also use the findings of this research for better understanding on investors’ decision to give better recommendations to them. Stock prices then reflect their true value and Thailand stock market becomes the yardstick of the economy’s wealth and helps enterprises to raise capital for business activities.
37
Bonney, Leff, Christopher R. Plouffe, Bryan Hochstein, and Lisa L. Beeler. "Examining salesperson versus sales manager evaluation of customer opportunities: A psychological momentum perspective on optimism, confidence, and overconfidence." Industrial Marketing Management 88 (July 2020): 339–51. http://dx.doi.org/10.1016/j.indmarman.2020.05.012.
Full text
38
Hwang, Kumju, and Jinsook Choi. "How Do Failed Entrepreneurs Cope with Their Prior Failure When They Seek Subsequent Re-Entry into Serial Entrepreneurship? Failed Entrepreneurs’ Optimism and Defensive Pessimism and Coping Humor as a Moderator." International Journal of Environmental Research and Public Health 18, no. 13 (June 30, 2021): 7021. http://dx.doi.org/10.3390/ijerph18137021.
Full textAbstract:
Entrepreneurial failure is prevalent, and particularly when the COVID−19 crisis exacerbates the economic recession, it becomes even more prevalent. Entrepreneurs experience an intensive emotional crisis when their ventures fail, and this deleterious impact, including stress and emotional pain, may prevent failed entrepreneurs (FEs) from restarting; hence, how they cope with failure has received increased attention in recent years. However, most of the extant literature focuses on success rather than failure, and there is very limited literature on how FEs cope with the psychological and emotional crisis caused by failure. This study focuses on FEs’ use of optimism and defensive pessimism as coping strategies within the mental simulation theory with respect to their re-entry intentions. It examines the impact of career ambition and public self-awareness on optimism, of the fear of failure (FoF) and self-doubt, on defensive pessimism, and of coping humor as a moderator. We used structural equation modeling to analyze the data of 277 Korean FEs who have actual entrepreneurial failure experiences and actively prepared for their re-entry. The results show that career ambitions and public self-awareness have an impact on optimism, and FoF and self-doubt lead to defensive pessimism. Coping humor also has a moderating effect on the path from defensive pessimism to the intention to re-enter. This study advances the literature on coping mechanisms that FEs employ to manage the negative impact of failure and prepare for their subsequent re-entry. Its theoretical model, based on the mental simulation theory combined with social comparison theory, provides a possible integrative framework that includes both the pervasively held view of entrepreneurs’ optimism related to overconfidence and their defensive pessimism related to their vulnerability due to their ventures’ failure. Thus, this study makes theoretical contributions to the literature of entrepreneurial failure, as well as practical implications for policymakers and educators who assist FEs in successfully coping with entrepreneurial failure and re-entry.
39
Szumny, Bartosz. "Speculative bubbles as anomaly of modern capital markets." Equilibrium 2, no. 1 (June 30, 2009): 39–47. http://dx.doi.org/10.12775/equil.2009.004.
Full textAbstract:
Speculative bubbles are one of the main problems that modern economics is dealing with today. It is important problem because there is a straight relationship between bubbles and financial crises about which we hear everyday. From the 17th century “tulip bubble” to the “internet bubble” in which the prices of technological company’s shares surged and then collapsed, many investors have lost fortunes of money. What exactly causes so much panic and trouble in financial markets? In the understanding of these phenomena the behavioural finance can play an important role and consequently give us better knowledge of these phenomena. In the following paper, I have analyzed important behavioural aspects of a bubble, including: herd behaviour, information cascade, overconfidence and optimism, representativeness heuristics and conservatism bias. All these aspects will help to better understand structure of a bubble and suggest ways to mitigate the occurrences and collapses of it in financial markets.
40
Valliere, Dave, and Norm O'Reilly. "Seeking the Summit: Exploring the Entrepreneur–Mountaineer Analogy." International Journal of Entrepreneurship and Innovation 8, no. 4 (November 2007): 293–304. http://dx.doi.org/10.5367/000000007782433213.
Full textAbstract:
Entrepreneurs and mountaineers face challenges that share many characteristics distinct from mainstream society and managerial activity: lofty goals, individualistic efforts, risky and highly uncertain environments, and severe resource constraints. A qualitative explication of this analogy is extended with a comparative quantitative examination of shared individual traits (risk avoidance, optimism, flexibility and overconfidence) among mountaineers, entrepreneurs and control subjects. The findings provide support for an entrepreneur–mountaineer analogy, suggesting common themes for the roles of both groups. These results are integrated with previous research on the mountaineering personality to suggest ways by which the two groups could learn from each other. The analogy is then extended beyond the individual level by explicit mapping between entrepreneurs and mountaineers in terms of objectives, strategies, resources and risks faced. This mapping is used to suggest areas of entrepreneurship research that may benefit from the adoption of the analogy perspective.
41
Cervellati, Enrico Maria. "Analysts’ distorted valuation of hi-tech stocks." Corporate Ownership and Control 10, no. 1 (2012): 380–95. http://dx.doi.org/10.22495/cocv10i1c3art6.
Full textAbstract:
This paper aims to examine the distorted valuations of internet companies during the dot.com bubble. The analysis is performed through a clinical study of Tiscali, the most known Italian internet company at the time. First, its IPO is presented, underlining the presence of the three typical phenomena: the decision to go public during a hot issue market, the initial underpricing, and the long run underperformance. Second, a content analysis of the reports issued by analysts in the period 1999-2001 shows the most common mistakes in using relative market valuation techniques. Third, an event study analysis shows the market reaction following acquisition deals announcements was often driven by irrational exuberance during the internet craze, but also that after the bubble burst the market eventually understood analysts over optimism. Other behavioral biases like overconfidence, but also heuristics like anchoring are discussed in the paper, as well as the need for analysts’ to insert in their toolbox new instruments provided by the behavioral finance literature.
42
Prosad, Jaya Mamta, Sujata Kapoor, and Jhumur Sengupta. "Behavioral biases of Indian investors: a survey of Delhi-NCR region." Qualitative Research in Financial Markets 7, no. 3 (August 3, 2015): 230–63. http://dx.doi.org/10.1108/qrfm-04-2014-0012.
Full textAbstract:
Purpose – The purpose of this paper is to examine the presence the behavioral biases in Indian investors specifically, overconfidence, excessive optimism (pessimism), herd behavior and the disposition effect. It further investigates the role of demographics and investor sophistication in influencing the biases. Finally, it reveals which bias is most prevalent in the Indian context. Design/methodology/approach – For this purpose, a survey has been conducted on the investors of the Delhi/NCR area. The data have been collected with the help of a structured questionnaire that is analyzed with the help of relevant statistical tools. Findings – The survey evidence shows that behavioral biases are dependent on investors’ demographics and their trading sophistication with highest influencing factors being age, profession and trading frequency. Each bias corresponds to a specific set of investor characteristics and overconfidence comes out to be the most important bias in the Indian context. Research limitations/implications – The potential limitations of the present survey can be ascribed to socially desirable responses and their difference with actual market behavior. Further, due to time and resource constraint, the data set is limited to investors of only Delhi/NCR. Practical implications – This study is most relevant for financial advisors, as it facilitates them in gaining a better understanding of their clients’ psychology. It can aid them in developing behaviorally modified portfolio, which best suits their clients’ predisposition. Originality/value – The paper gives a unique insight on the investors’ profile corresponding to each bias under consideration. It not only updates the evidence on behavioral biases but also highlights which bias is the most influential in the Indian context.
43
Jordão, Ana Rita, Renato Costa, Álvaro Lopes Dias, Leandro Pereira, and José Pedro Santos. "BOUNDED RATIONALITY IN DECISION MAKING: AN ANALYSIS OF THE DECISION-MAKING BIASES." Business: Theory and Practice 21, no. 2 (October 8, 2020): 654–65. http://dx.doi.org/10.3846/btp.2020.11154.
Full textAbstract:
Decision-making is a multidisciplinary and ubiquitous phenomenon in organizations, and it can be observed at the individual, group, and organizational levels. Decision making plays, however, an increasingly important role for the manager, whose cognitive competence is reflected in his ability to identify potential opportunities, to immediately detect and solve the problems he faces, and to predict and prevent future threats. Nevertheless, to what extent do managers of the most diverse sectors and industries continue to rely on false knowledge when they have better strategies at their disposal? The present article proposes, through the application of bibliographically based instruments, the diagnosis of three prominent biases – overconfidence, optimism, and anchoring effect – in managers of the Portuguese port sector, as well as also seeking to establish a comparative analysis with the conclusions already documented in relation to the Brazilian civil construction sector. In addition, and in view of the results obtained, this paper also provides a set of measures capable of contributing to the mitigation of the effects of these and other biases, and, in this way, to the improvement of the decisions of said managers.
44
Chaudhary, Nandita. "Cross-Cultural Psychology as a Solution to Global Inequality: Optimism, Overconfidence, or Naiveté?: A commentary on “The Positive Role of Culture: What Cross-Cultural Psychology Has to Offer to Developmental Aid Effectiveness Research” by Symen A. Brouwers." Journal of Cross-Cultural Psychology 49, no. 4 (April 20, 2018): 535–44. http://dx.doi.org/10.1177/0022022117740224.
Full textAbstract:
This article presents an accurate assessment of international aid and its failure to reach declared objectives. The reason for this widespread miscarriage is attributed to the inability to understand cultural differences. People’s opposition, resistance, or apathy toward interventions are credited to social-psychological predispositions. To save the “saviors,” Brouwers suggests that welfare initiatives should collaborate with cultural sciences, more specifically cross-cultural psychology. I agree with the author about interventions being rather blind to cultural differences resulting in frequent failure to achieve ecological validity. The potential contributions of cultural and social scientists in this field are also undeniable. However, I have some reservations about the confidence placed in cross-cultural psychology for several reasons. Cross-cultural psychology works with individual-psychological and social-collective phenomena, addressing only a fragment of the story of inequality among and between the people of the world. There is little or no attention to history, geography, economics, or politics, all of which have profound impact on poverty and disadvantage. It is as if the world’s problems of poverty can be fixed by reframing how people (both agents and beneficiaries) think about “culture-behavior relationships.” This optimism appears to emerge from overconfidence or naiveté, or both.
45
Arsalidou, Demetra. "Educating Bankers on Law, Ethics and Social Values: A Perspective from the US, the UK and Europe." European Company and Financial Law Review 14, no. 4 (February 14, 2018): 569–608. http://dx.doi.org/10.1515/ecfr-2017-0026.
Full textAbstract:
The paper questions how global businesses can alter their attitudes to make them more ethical and transparent. It examines three causes of a financial catastrophe that are linked to bankers’ attitudes and mindsets: bankers’ excessive greed that leads them to fall into ruinous temptations such as securitisation and short-termism, bankers’ behavioural limitations such as overconfidence and over optimism and finally bankers’ ignorance of financial products. The paper then considers an alternative model to confronting bankers’ deficiencies that is more sustainable in the long run: the tool of education. When there is so much disapproval of companies for their lack of corporate social responsibility, education can help significantly. Its role is three-fold: First, it can alert future leaders of the positives of acting selflessly and for socially responsible goals. Second, it can teach them of what the law actually says: that they must promote the company’s best interests – and not the shareholders’ short-term interests – a matter frequently ignored within business practice. Finally, via education future leaders can learn a thing or two about the behavioural weaknesses often characterising people in high executive positions; they can also learn about the risks of showing poor judgment and unfamiliarity with a business’ financial nuances and related risks. These ‘educational measures’ can help restore integrity back into banking whilst underlining the weight of ethics-based corporate cultures.
46
Gödör, Zsuzsanna, and Georgina Szabó. "Would you Make the Right Decision? – Decision Making Biases in Economy - Related Dilemmas." Valahian Journal of Economic Studies 9, no. 1 (April 1, 2018): 59–66. http://dx.doi.org/10.2478/vjes-2018-0006.
Full textAbstract:
Abstract As they say, money can’t buy happiness. However, the lack of it can make people’s lives much harder. From the moment we open our first bank account, we have to make lots of financial decisions in our life. Should I save some money or should I spend it? Is it a good idea to ask for a loan? How to invest my money? When we make such decisions, unfortunately we sometimes make mistakes, too. In this study, we selected seven common decision making biases - anchoring and adjustment, overconfidence, high optimism, the law of small numbers, framing effect, disposition effect and gambler’s fallacy – and tested them on the Hungarian population via an online survey. In the focus of our study was the question whether the presence of economic knowledge helps people make better decisions? The decision making biases found in literature mostly appeared in the sample as well. It proves that people do apply them when making decisions and in certain cases this could result in serious and costly errors. That’s why it would be absolutely important for people to learn about them, thus increasing their awareness and attention when making decisions. Furthermore, in our research we did find some connection between decisions and the knowledge of economics, people with some knowledge of economics opted for the better solution in bigger proportion
47
Tseng, Pi-Hsun, Xuan-Qi Su, and Hsiu-Jung Tsai. "Managerial education and the wealth effect of corporate capital investment in Taiwan." Managerial Finance 43, no. 12 (December 4, 2017): 1358–74. http://dx.doi.org/10.1108/mf-03-2017-0074.
Full textAbstract:
Purpose The purpose of this paper is to study the effect of managerial education levels on the wealth effect at the time of investment announcements, by testing two competitive hypotheses: the agency theory-based overinvestment hypothesis vs the Q-theory-based organizational legitimacy hypothesis. Design/methodology/approach The authors construct the sample by hand-collecting the announcement dates of capital investments from major newspapers published in Taiwan from 2006 to 2014. The authors then use the event study methodology to estimate cumulative abnormal returns at the time of investments announcements to measure the wealth effect. Finally, the authors examine the wealth effect for capital-investing firms with higher managerial education vs those with lower managerial education. The authors also conduct a cross-sectional regression to test the relation between the wealth effect of capital investment and managerial education. Findings The empirical results indicate that the wealth effect at the time of investment announcements is less favorable for firms with better-educated managers; this negative relation is mitigated for firms with higher institutional ownership and is aggravated for family-controlled firms; and the overall findings are supported by the agency theory-based overinvestment hypothesis, suggesting that higher managerial education lead to greater managerial optimism/overconfidence, which in turn increases the likelihood of overinvestment and implies a less favorable wealth effect associated with capital investment. Originality/value This study contributes to the literature by proposing a new, unexplored stock market’s reaction channel through which managerial education signals adverse information about potential overinvestment behavior, even though many studies suggests that managerial education serves as an indication of knowledge/capability and improves firm performance.
48
TEKIN, Bilgehan. "Behavioral Biases as An Effective Factor for the Firm Financial Decision-Making: A Literature Review." JOURNAL OF SOCIAL SCIENCE RESEARCH 10, no. 2 (June 30, 2016): 2103–15. http://dx.doi.org/10.24297/jssr.v10i2.4748.
Full textAbstract:
Decision-making process is a multi-faceted and complex process. Decision making can be defined like a process of choosing from among a number of alternatives. It will not contribute enough to be fully understood and to effective decision making to be addressed only from the rational point of view. Behavioral finance is an integral part of the decision-making process. Individuals can improve their performance by recognizing the biases which discussed in the framework of behavioral finance. Understanding the possible negative effects of biases allows to the individuals to make better choices and they can avoid repeating the expensive errors in future. Result of investigations of behavioral biases on decision-makers in the firms, managerial bias issue has been raised. The studies show the effect of managerial biases on many financial decisions in firms. This paper investigated the role of biases such as overconfidence, loss aversion, optimism, anchoring, narrow framing, self-serving attribution, disposition effect etc. on financial decisions such as investing, financing, equity market, capital structure etc. This study review of 30 international studies related with behavioral corporate finance and behavioral biases that affect financial decisions in firms. The studies were gleaned from Web of Science and Google Scholar. The main contribution of this study to the literature is this study brings out the impact of behavioral biases on financial decisions in the firms by summarizing the previous studies. In this sense, this work also has an assembly quality. Therefore, this is also intended with this study that to transfer the knowledge and intellectual formation about the impact of behavioral bias on the financial decisions. In this paper, most important behavioral biases in the behavioral finance literature will be addressed.
49
Anilov, Artem. "Behavioral Motives of the Payout Policy Choice: Literature Review." Journal of Corporate Finance Research / Корпоративные Финансы | ISSN: 2073-0438 11, no. 4 (December 28, 2017): 93–112. http://dx.doi.org/10.17323/j.jcfr.2073-0438.11.4.2017.93-112.
Full textAbstract:
The question of the significance of the payout policy in terms of value creation has been in the works for over 50 years now. These endeavors have led to the establishment of some classic theories that explain the different patterns in a company’s payout policy choices such as the signaling theory, the agency costs theory, the clientele theory and the catering theory. However, the results are not always consistent among different authors, which means that these theories cannot be used universally. Results vary widely among different samples and different time periods. The classic theories assume that all agents on the market are fully rational, which is rather unrealistic since an agent’s actions cannot always be explained by financial theories. These two facts led to the development of the behavioral explanation for the payout policy choice. This approach focuses on the behavioral characteristics of managers that are responsible for the decision-making process in the company. Thus, the payout policy, according to this approach, is considered to be a function of the behavioral characteristics of managers (overconfidence, optimism, risk preferences, etc.) rather than a function of the financial variables. The main difficulty here is how to measure the behavior of managers.
This particular article reviews the research that covers the classic and modern theories of payout policy. This article covers the logic of the development of different views on the payout policy. The authors cover articles that test different theories, analyze the main results and conclusions, and investigate the reasons for the development of these theories. The main focus has been on the behavioral approach, which is considered to be the most fruitful direction for future research. The authors also cover the methodology of the existing papers, the variables that measure behavioral characteristics and the results.
50
Cervellati, Enrico Maria, Francesco Corea, and Paolo Zanghieri. "Entrepreneurs’ behavioural biases, risk misperception and company underinsurance." Risk Governance and Control: Financial Markets and Institutions 9, no. 4 (2019): 49–66. http://dx.doi.org/10.22495/rgcv9i4p5.
Full textAbstract:
We analyse the effect of behavioural biases on entrepreneurs’ decisions to insure their firms against different kinds of corporate risks. We use a large sample of 2,295 Italian small and medium enterprises (SMEs), finding that they under-insure themselves. Since SMEs should insure more – in proportion – compared to bigger companies, analysing the reasons for this underinsurance is relevant to improve entrepreneurs’ decisions and help their firms, but also from a policy-making point of view. We link corporate insurance choices with the entrepreneurs’ personal characteristics and behavioral traits as well as with their households’ financial choices. Our methodology uses stepwise regressions to discern which variables are statistically significant. In our results, we find that entrepreneurs not only underinsure their firms but also themselves, thus exposing themselves, their firms and their families to high idiosyncratic risk. We find that these suboptimal decisions are affected by behavioural biases such as overconfidence, over optimism, risk misperceptions, and stubbornness, even though in a not straightforward manner. We measure both the overall effect on the number of insurances underwritten and on the specific type of insurance contract. In general, we find that relatively bigger firms do buy more insurance, and that trust in insurance companies is a key driver to insurance purchasing, as well as the estimated probability of suffering damages in the future. In contrast, entrepreneurs do underwrite fewer insurance contracts if their firms caused or suffered damages in the past, but also if they possess personal insurances, thus treating them as substitutes for firm insurance. Since SMEs represent a very important part not only of the Italian economy but also of the economy of many other countries, analyzing their insurance-related decisions is relevant because understanding the determinants that may lead entrepreneurs to mitigate the risks they face is beneficial not only for them and their firms but also for the economy as a whole.