Psychology and behavioral finance

Bouteska, Ahmed; Regaieg, Boutheina

doi:10.1108/emjb-08-2018-0052

Cited by 12 publications

(8 citation statements)

References 56 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Individuals will subsequently revise or adjust the initial judgements, resulting in what is called the anchoringadjustment process (Givi and Galak, 2019;Tamir and Mitchell, 2013). The nature of the role of the anchoring bias in auditors' judgment making process identified in this study is similar to the ones reported in previous studies, in which it is found that individuals in different decision situations tend to start their judgment making process by first crated an initial point of reference which is subsequently adjusted to come up with a final judgment (Bouteska and Regaieg, 2019;Xiao, 2020).…”

Section: Discussionsupporting

confidence: 78%

A Qualitative Exploration of Heuristics and Cognitive Biases in Auditor Judgements

Maradona

2020

View full text Add to dashboard Cite

Professional judgement is inherent in financial statement audits because various methods, techniques, or approaches prescribed in auditing standards do not provide auditors with detailed guidance or specific audit criteria. While auditors are expected to exercise their judgements based on careful reasoning, there is a possibility that they do not always follow such an approach and instead make their judgements using heuristics. This study aims to penetrate and reveal whether there are cognitive biases in the judgements of auditors and what heuristics lead to these biases. This study employs a qualitative research design and uses ethnomethodology as a research approach. Data were collected using in-depth semi-structured interviews with 15 auditors who were either partners, managers, seniors, or juniors at a public accounting firm. Using the heuristic-bias framework as a theoretical lens and based on an analysis involving data condensation, data display, and conclusion drawing and verification, this study identifies five types of biases that auditors can experience: jumping to conclusions, groupthink, representativeness, availability, and anchoring biases. The results of this study present practical implications for auditors, accounting professional associations, public accounting firms, and academic institutions. That is, the findings provide insights for formulating strategies aimed at raising auditors’ awareness about possible systematic errors, or biases, in professional judgements when auditors rely on heuristics as a simplifying judgement-making strategy.

show abstract

Section: Discussionsupporting

confidence: 78%

A Qualitative Exploration of Heuristics and Cognitive Biases in Auditor Judgements

Maradona

2020

View full text Add to dashboard Cite

show abstract

“…Using the Wilcoxon signed-rank test, we find that the distributions of target prices between financial and non-financial firms are not statistically different; therefore, there is no need to separate our sample [3]. This is in accordance with Bouteska and Regaieg (2020), who use a sample of 49 traded Tunisian financial and non-financial firms on the TSE to examine whether Tunisian financial analysts are prone to optimism and anchoring bias.…”

Section: Data and Samplementioning

confidence: 55%

Board of directors and target price performance: evidence from Tunisia

Fredj

Gana

2022

EMJB

View full text Add to dashboard Cite

PurposeThis article examines the link between the structure of the board of directors and target price accuracy using a sample of 51 listed firms on the Tunisian Stock Exchange over the period of 2011–2017.Design/methodology/approachIn this study, the authors used the generalised method of moments (GMM) model to control the endogeneity problem.FindingsAs a result, that model can serve as a signal in the forecasting process. The authors' results suggest that target price accuracy is negatively related to board independence, and dual Chief Executive officer (CEO). In addition, CEO compensation tends to exert a negative impact on target price error.Practical implicationsThe authors' findings are valuable for common investors because the findings can be useful in enhancing their capital allocation decisions by assigning higher weights to forecasts issued by firms with strong corporate governance systems. The authors' study also has practical implications for managers and policymakers. Specifically, the evidence provided herein suggests that firms with strong corporate governance mechanisms enhance the accuracy of market expectations, alleviate information asymmetry, and limit market surprises, especially in a context characterised by weak investor protection. The authors' results highlight the advantages of strong corporate governance in improving a firm's information environment and, therefore, are useful for the cost–benefit analysis of improving internal governance mechanisms. Additionally, the authors' results may prove useful to investors who can rely on the information provided by analysts for well-governed companies.Social implicationsThe authors' study contributes to the literature in both corporate governance and analysts' forecasts fields. The study provides additional evidence of the benefit of board quality attributes on target price accuracy in an emerging market characterised by high information asymmetry and weak investor protection. The authors' findings exhibit the effectiveness of board attributes in producing better financial information quality in Tunisia. This is useful for investors who may improve their capital allocation decisions by assigning greater weights to target price forecasts of companies with good governance quality, suggesting that good corporate governance is a credible signal of better financial information quality. These results have important implications for capital market regulators and corporate management in encouraging the implementation of good governance practices.Originality/valueThe authors attempted to assess whether corporate governance of listed firms are priced in the Tunisian context characterised by weak governance control and to highlight which mechanism is highly considered by independent financial analysts to build their forecasts.

show abstract

“…We recommend that future research should be conducted in the context of developed countries as most of the empirical research studies in the area of behavioral biases (for example, recent studies like Areiqat et al , 2019; Sabir et al , 2019; Metawa et al , 2019; Khilar and Singh, 2019; Mushinada and Veluri, 2019; Alrabadi et al , 2018; Rasheed et al , 2018; Bouteska and Regaieg, 2018, 2019) is conducted in developing countries, especially in India and Tunisia. The probable reason for this could be the emerging financial markets in developing countries.…”

Section: Discussionmentioning

confidence: 99%

A systematic review on behavioral biases affecting individual investment decisions

Badola,

Sahu,

Adlakha

2023

QRFM

View full text Add to dashboard Cite

Purpose This study aims to systematically review various behavioral biases that impact an investor’s decision-making process. The prime objective of this paper is to thematically explore the behavioral bias literature and propose a comprehensive framework that can elucidate a more reasonable explanation of changes in financial markets and investors’ behavior. Design/methodology/approach Systematic literature review (SLR) methodology is applied to a portfolio of 71 peer-reviewed articles collected from different electronic databases between 2007 and 2021. Content analysis of the extant literature is performed to identify the research themes and existing gaps in the literature. Findings This research identifies publication trends of the behavioral biases literature and uncovers 24 different biases that impact individual investors’ decision-making. Through thematic analysis, an attribute–consequence–impact framework is proposed that explains different biases leading to individual investors’ irrationality. The study further proposes directions for future research by applying the theory–characteristics–context–methodology framework. Research limitations/implications The results of this research will help scholars and practitioners in understanding the existence of various behavioral biases and assist them in identifying potential strategies which can evade the negative effects of these biases. The findings will further help the financial service providers to understand these biases and improve the landscape of financial services. Originality/value The essence of the current paper is the application of the SLR method on 24 biases in the area of behavioral finance. To the best of the authors’ knowledge, this study is the first attempt of its kind which provides a methodical and comprehensive compilation of both cognitive and emotional behavioral biases that affect the individual investor’s decision-making.

show abstract

Psychology and behavioral finance

Cited by 12 publications

References 56 publications

A Qualitative Exploration of Heuristics and Cognitive Biases in Auditor Judgements

A Qualitative Exploration of Heuristics and Cognitive Biases in Auditor Judgements

Board of directors and target price performance: evidence from Tunisia

A systematic review on behavioral biases affecting individual investment decisions

Contact Info

Product

Resources

About