Welcome to Francis Academic Press

Academic Journal of Business & Management, 2020, 2(4); doi: 10.25236/AJBM.2020.020401.

The impact of behavioral bias on individual investors and corporation capital structure

Author(s)

Yidan Xing

Corresponding Author:
Yidan Xing
Affiliation(s)

School of Business, University of Sydney, Australia

Abstract

An increasing number of professional studies are being published about the new field of behavioral finance. This paper offers an overview of behavioral finance and reviews literatures about its origin, content and rationale of this developing study. Some evidence has been given that behavioral finance exists in both developed financial markets and emerging markets. This paper focuses on how behavioral bias influences individual investment decisions and corporation’ s capital structure.

Keywords

behavioral finance, behavioral bias, capital structure, investor sentiment, merger and acquisitio

Cite This Paper

Yidan Xing. The impact of behavioral bias on individual investors and corporation capital structure. Academic Journal of Business & Management (2020) Vol. 2, Issue 4: 1-8. https://doi.org/10.25236/AJBM.2020.020401.

References

[1] Barberis, N., & Thaler, R,.2003, A survey of behavioral finance, Handbook of the Economics of Finance, pp.1053-1128.
[2] Oprean, C. and Tanasescu, C., 2014, Effects of behavioural finance on emerging capital markets, Procedia Economics and Finance, vol.15, no.4, pp.1710-1716.
[3] Debata, B, Dash, S.R, and Mahakud, J,.2018, Investor sentiment and emerging stock market liquidity, Finance Research Letter, vol.26, pp.15–31.
[4] Hu, S., Zhong, M. and Cai, Y., 2019, Impact of Investor Behavior and Stock Market Liquidity: Evidence from China, Entropy, vol.21.no.11, pp.1111.
[5] Chira, I., Adams, M. and Thornton, B., 2008, Behavioral bias within the decision-making process. Journal of Business and Economics Research, Vol. 6, No. 8
[6] Daniel, K., Hirshleifer, D., Subrahmanyam, A., 1998, Investor psychology and security market under- and overreactions. Journal of Finance, vol.53, pp.1839–1886.
[7] Gervais, S., Odean, T., 2001, Learning to be overconfident. Review of Financial Studies vol.14, pp.1–27.
[8] Chuang, W.I. and Lee, B.S., 2006, An empirical evaluation of the overconfidence hypothesis. Journal of Banking & Finance, vol.30, no.9, pp.2489-2515.
[9] Barber B, Odean T., 1999, The courage of misguided convictions. Financial Analysts Journal, pp. 41-55.
[10] Bracha A, Donald JB., 2012, Affective Decision Making: A Theory of Optimism Bias, Games and Economic Behavior, vol.75, pp.67-80.
[11] Falconer L., 2002, The influences of risk perception. University of Bath.
[12] Kahneman, D and Tversky, A., 1992. Advances in prospect theory: Cumulative representation of uncertainty. Journal of Risk and uncertainty, 5(4), pp.297-323.
[13] Grinblatt, M. and Han, B., 2005, Prospect theory, mental accounting, and momentum. Journal of financial economics, vol.78, no.2, pp.311-339.
[14] Chen, G., Kim, K.A., Nofsinger, J.R. and Rui, O.M., 2007, Trading performance, disposition effect, overconfidence, representativeness bias, and experience of emerging market investors, Journal of Behavioral Decision Making, vol.20, no.4, pp.425-451.
[15] Yates, J. F., Lee, J., & Shinotsuka, H.,1996, Beliefs about overconfidence, including its cross-national variation, Organizational Behavior and Human Decision Processes, vol.65, pp.138–147.
[16] Hofstede, G., 2001. Culture's consequences: Comparing values, behaviors, institutions and organizations across nations. Sage publications.
[17] Weber, E.U., Hsee, C.K., 1998, Cross-cultural differences in risk perception, but cross-cultural similarities in attitudes towards perceived risk, Management Science, vol.44, no.9, pp.1205–1217.
[18] Thaler, R.H., Johnson, E.J., 1990, Gambling with the house money and trying to break even: the effects of prior outcomes on risky choice. Management Science, vol.36, pp.643–660.
[19] Jegadeesh, N., & Titman, S., 2001, Profitability of momentum strategies: An evaluation of alternative explanations. Journal of Finance, vol.56, no.2, pp.699-720.
[20] Bange, M., 2000, Do the portfolios of small investors reflect positive feedback trading? Journal of Financial and Quantitative Analysis, vol.35, pp.239–255.
[21] Odean, T., 1998, Are investors reluctant to realize their losses? Journal of Finance, vol.53, pp.1775–1798.
[22] Baker, M., Ruback, R.S. and Wurgler, J., 2007, Behavioral corporate finance. Handbook of empirical corporate finance. pp. 145-186. Elsevier.
[23] Kaplan, S.N., Klebanov, M.M. and Sorensen, M., 2012, Which CEO characteristics and abilities matter?, The Journal of Finance, vol.67,no.3, pp.973-1007.
[24] Heaton, J.B., 2002, Managerial optimism and corporate finance. Financial Management, vol. 31, no.2, pp.33–45.
[25] Hackbarth, D., 2008, Managerial traits and capital structure decisions. Journal of Financial and Quantitative Analysis, vol.4, no.4, pp.843–882.
[26] Malmendier, U., Tate, G. and Yan, J., 2011, Overconfidence and early‐life experiences: the effect of managerial traits on corporate financial policies. The Journal of finance, vol.66, no.5, pp.1687-1733.
[27] Huang, R., Tan, K.J.K. and Faff, R.W., 2016. CEO overconfidence and corporate debt maturity. Journal of Corporate Finance, 36, pp.93-110.
[28] Roll, R., 1986, The Hubris Hypothesis of Corporate Takeovers, Journal of Business, vol.59, pp.197–216.
[29] Malmendier, U. and Tate, G., 2015, Behavioral CEOs: The role of managerial overconfidence. Journal of Economic Perspectives, vol.29, no.4, pp.37-60.
[30] Lin, B.X., Michayluk, D., Oppenheimer, H.R. and Reid, S.F., 2008. Hubris amongst Japanese bidders. Pacific-Basin Finance Journal, vol.16, no.1, pp.121-159.
[31] Ferris, S.P., Jayaraman, N. and Sabherwal, S., 2013, CEO overconfidence and international merger and acquisition activity, Journal of Financial and Quantitative Analysis, vol.48, no.1, pp.137-164.