CEO emotional bias and investment decision, Bayesian network method
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 th...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Growing Science
2012-08-01
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| Series: | Management Science Letters |
| Subjects: | |
| Online Access: | http://www.growingscience.com/msl/Vol2/msl_2012_40.pdf |
| _version_ | 1818587393217789952 |
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| author | Jarboui Anis Mohamed Ali Azouzi |
| author_facet | Jarboui Anis Mohamed Ali Azouzi |
| author_sort | Jarboui Anis |
| collection | DOAJ |
| description | 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 some other 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. This paper shows how CEO emotional bias (optimism, loss aversion and overconfidence) affects the investment decisions. The proposed model of this paper uses Bayesian Network Method to examine this relationship. Emotional bias has been measured by means of a questionnaire comprising several items. As for the selected sample, it has been composed of some 100 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. |
| first_indexed | 2024-12-16T09:08:09Z |
| format | Article |
| id | doaj.art-83f14eb9efb345e59cd13bee0a91b215 |
| institution | Directory Open Access Journal |
| issn | 1923-9335 1923-9343 |
| language | English |
| last_indexed | 2024-12-16T09:08:09Z |
| publishDate | 2012-08-01 |
| publisher | Growing Science |
| record_format | Article |
| series | Management Science Letters |
| spelling | doaj.art-83f14eb9efb345e59cd13bee0a91b2152022-12-21T22:37:02ZengGrowing ScienceManagement Science Letters1923-93351923-93432012-08-012412591278CEO emotional bias and investment decision, Bayesian network methodJarboui AnisMohamed Ali AzouziThis 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 some other 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. This paper shows how CEO emotional bias (optimism, loss aversion and overconfidence) affects the investment decisions. The proposed model of this paper uses Bayesian Network Method to examine this relationship. Emotional bias has been measured by means of a questionnaire comprising several items. As for the selected sample, it has been composed of some 100 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.http://www.growingscience.com/msl/Vol2/msl_2012_40.pdfEmotional biasCorporate financeOptimismOverconfidenceLoss aversionCapital investment decision Bayesian network |
| spellingShingle | Jarboui Anis Mohamed Ali Azouzi CEO emotional bias and investment decision, Bayesian network method Management Science Letters Emotional bias Corporate finance Optimism Overconfidence Loss aversion Capital investment decision Bayesian network |
| title | CEO emotional bias and investment decision, Bayesian network method |
| title_full | CEO emotional bias and investment decision, Bayesian network method |
| title_fullStr | CEO emotional bias and investment decision, Bayesian network method |
| title_full_unstemmed | CEO emotional bias and investment decision, Bayesian network method |
| title_short | CEO emotional bias and investment decision, Bayesian network method |
| title_sort | ceo emotional bias and investment decision bayesian network method |
| topic | Emotional bias Corporate finance Optimism Overconfidence Loss aversion Capital investment decision Bayesian network |
| url | http://www.growingscience.com/msl/Vol2/msl_2012_40.pdf |
| work_keys_str_mv | AT jarbouianis ceoemotionalbiasandinvestmentdecisionbayesiannetworkmethod AT mohamedaliazouzi ceoemotionalbiasandinvestmentdecisionbayesiannetworkmethod |