Illusion of control in farmers’ investment and financing decisions

PurposePeople’s tendency to overestimate their ability to control random events, known as illusion of control, can affect financial decisions under uncertainty. This study developed an artifactual field experiment on illusion of control for a farm machinery investment.Design/methodology/approachIn an experiment with two treatments, the individual farmer was either given or not given a sense of control over a random outcome. After each decision, the authors elicited perceived control, and a questionnaire collected additional indirect measures of illusion of control from 78 German farmers and 10 farm advisors.FindingsThe results did not support preregistered hypotheses of the presence of illusion of control. This null result was robust over multiple outcomes and model specifications. The findings demonstrate that cognitive biases may be small and difficult to replicate.Research limitations/implicationsThe sample is not representative for the German farming population. The authors discuss why the estimated treatment effect may represent a lower bound of the true effect.Originality/valueIllusion of control is well-studied in laboratory settings, but little is known about the extent to which farmers’ behavior is influenced by illusion of control.

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Cognitive biases of consumers as barriers in transition towards circular economy

Management Decision ◽

10.1108/md-08-2018-0951 ◽

2019 ◽

Vol 57 (4) ◽

pp. 921-936 ◽

Cited By ~ 11

Author(s):

Poonam Singh ◽

Elisa Giacosa

Keyword(s):

Business Model ◽

Circular Economy ◽

Business Models ◽

Cognitive Biases ◽

Content Type ◽

Effective Interventions ◽

Free Transition ◽

Conceptual Paper ◽

The Individual ◽

Practical Implications

Purpose The purpose of this paper is to identify the cognitive biases of consumer and explain how they are creating barriers in transition towards circular economy (CE). Design/methodology/approach This is a conceptual paper which adopts a consumer-centric conceptualization of CE by focussing on cognitive biases as an underlying and unifying mechanism which is creating barriers in the adoption of CE. This conceptualization explains consumers’ non-adoption of circular business model, highlight synergies across disconnected theories and streams of research originating in different disciplines and at the individual, societal and cultural levels of analysis. Findings The findings of this paper suggest that circular business models are not fulfilling the psychological, social and cultural needs of the consumers and that in turn lead to barriers in diffusion of the CE. Consumers have a negative connotation with the different circular business model due to their cognitive biases. Practical implications The paper details about key implications to design effective interventions to modify consumer behaviour in the desired direction for hassle-free transition to CE from the linear economy. Originality/value This paper offers a shift in CE research from a deterministic approach to conceptualising consumers to a positivist approach to conceptualising consumers.

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Determinants of user behaviour and recommendation in social networks

Industrial Management & Data Systems ◽

10.1108/imds-07-2014-0219 ◽

2014 ◽

Vol 114 (9) ◽

pp. 1477-1498 ◽

Cited By ~ 29

Author(s):

Rafael Curras-Perez ◽

Carla Ruiz-Mafe ◽

Silvia Sanz-Blas

Keyword(s):

Social Networks ◽

Social Network ◽

Social Relations ◽

Perceived Control ◽

Structural Equation ◽

Uses And Gratifications ◽

Structural Equation Models ◽

Uses And Gratifications Theory ◽

Content Type ◽

The Individual

Purpose – The purpose of this paper is to analyse the determinants of social network use behaviour using Theory of Planned Behaviour (TPB) and Uses and Gratifications Theory. Design/methodology/approach – A quantitative study was carried out with data gathered by personal interview using a structured questionnaire. Relationships proposed in the theoretical model were estimated through structural equation models. In total, 811 users of social networks over 14 and residents in Spain were part of the sample. Findings – Results indicate that use attitude and the subjective norm, both TPB variables, directly and significantly influence social network loyalty. Thus, network loyalty can be achieved if the individual shows a favourable attitude towards use and receives positive feed-back (comments, opinions, etc.) from friends, acquaintances and other individuals in their environment. Perceived control has no influence on social network loyalty. Finally, this research highlights the importance of socialisation and entertainment as antecedents of social network attitude. Research limitations/implications – Social network use has been analysed globally and database includes users with very different profiles (e.g. Facebook and Tuenti) what may skew the results. Practical implications – Individuals access social networks to establish social links with friends/family/acquaintances, seeking entertainment and fun, but they are never used to be fashionable or up-to-date. Given the importance of social relations, companies should motivate participation elements in their social networks profiles. Originality/value – The paper presents a model that explains the formation of loyal social network customers, integrating TPB and Uses and Gratifications Theory to enable understanding of the role of these networks in individuals’ lives.

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Hedonism or self-growth? The influence of perceived control on individual product preferences for individuals under self-threat

Asia Pacific Journal of Marketing and Logistics ◽

10.1108/apjml-02-2019-0072 ◽

2019 ◽

Vol 32 (6) ◽

pp. 1343-1361

Author(s):

Taiyang Zhao ◽

Wei Song ◽

Xiaotong Jin ◽

Hongjing Cui ◽

Yang Li

Keyword(s):

Coping Strategies ◽

Perceived Control ◽

Design Methodology ◽

Interactive Effect ◽

Negative Experience ◽

Content Type ◽

Individual Product ◽

Product Preferences ◽

The Individual

Purpose The purpose of this paper is to study the influence of perceived control on product preferences of consumers under self-threat. Design/methodology/approach By conducting four experiments, this paper manipulated the participants’ self-threat and three sources of perceived control – namely, the controllability of the threat itself, the internal and external locus of control of the individual and priming the existing positive or negative experience of the individuals. After the manipulations, the participants’ product preferences for self-growth goods or hedonic goods were measured. Findings The findings of this research indicated that when consumers have a higher perceived control of the threats they are facing, they are more likely to adopt problem-focused coping strategies and show a preference for self-growth goods, which can help them resolve their threats. However, when consumers have a lower perceived control on the threats they are facing, they are more likely to adopt emotion-focused coping strategies and show a preference for hedonic goods, which can help them adjust their emotions. Originality/value This paper systematically confirms the interactive effect of perceived control and self-threat on consumers’ product preferences, as well as the meditation role of problem-focused coping and emotion-focused coping. It also provides insights for marketers to know what factors may affect consumers’ preferences for products in self-threat situations, thus contributing to marketing practices.

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Exposure to interbank investment and financing risk by Islamic banks: a dynamic panel analysis of Malaysia

International Journal of Islamic and Middle Eastern Finance and Management ◽

10.1108/imefm-11-2017-0289 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Mohammad Taqiuddin Mohamad ◽

Ahmad Azam Sulaiman ◽

Meguellati Achour

Keyword(s):

Balance Sheet ◽

Negative Relationship ◽

Panel Analysis ◽

Islamic Banks ◽

Dynamic Panel ◽

Content Type ◽

Financing Decisions ◽

Financing Risk ◽

Investment And Financing ◽

Dynamic Panel Analysis

Purpose The Government of Malaysia has developed an Islamic Interbank Money Market since January 1994 with the objective to facilitate funding for the Islamic banking sector in the country. This platform also enables Islamic banks to obtain Sharīʿah-compliant funds from other Islamic banks. This study aims to examine the effects of interbank investment and financing risk on the financing decisions of Malaysia’s Islamic banks between 1994 and 2015. The financing decisions are used as financing measures to determine the effect of investing in the interbank market and financing risk indicators on financing. Design/methodology/approach The descriptive, correlation and dynamic panel analysis results are derived with the help of LIMDEP 9.0 software. Findings The study found a negative relationship between the interbank investment variable with the financing decisions of Islamic banks. This reflects that an increase in interbank investment leads Islamic banks to reduce their level of financing. These findings prove that the investment activities between Islamic banks had a “substitution effect” and decreased their capability of financing because of their tendency to maintain liquidity. Originality/value Islamic banks are confident that they will generate higher profits in the coming financial year. The economic conditions of Malaysia do not influence Islamic banks’ financing decisions, whereas Islamic banks in this study are more dependent on the balance sheet indicators.

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Overconfidence and financial decision-making: a meta-analysis

Review of Behavioral Finance ◽

10.1108/rbf-01-2020-0020 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Matúš Grežo

Keyword(s):

Decision Making ◽

Meta Analysis ◽

Measuring Method ◽

Content Type ◽

Financial Decisions ◽

Financial Decision Making ◽

Indirect Measures ◽

Financial Decision ◽

The Relationship ◽

Direct Measures

PurposeThis meta-analysis reviews and summarizes the results of 34 studies to investigate the relationship between overconfidence and financial decision-making.Design/methodology/approachA correlation meta-analysis was conducted with three moderators of the relationship between overconfidence and financial decision-making examined: the type of overconfidence construct, the type of overconfidence measuring method and the type of financial decision-making.FindingsIt was found that the effect of overconfidence on financial decision-making was significant, but the magnitude of this effect was low. Additionally, indirect measures of overconfidence showed to have stronger effect than direct measures, and the overconfidence was mostly related to investment, followed by trading and innovativeness.Originality/valueThis was the first attempt to meta-analytically integrate results concerning the relationship between overconfidence and financial decision-making. Although overconfidence is described as a keystone for understanding financial decision-making, it was shown that it has rather limited effect on individuals' financial decisions. The findings suggest that indirect measures increase the overall effect and may cause the overvaluation of overconfidence in literature. The results call for more rigorous and consistent conceptualization of overconfidence in behavioral research.

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Risk and inefficiency

Managerial Finance ◽

10.1108/mf-04-2017-0130 ◽

2018 ◽

Vol 44 (6) ◽

pp. 688-703

Author(s):

Ines Ben Salah Mahdi ◽

Mouna Boujelbène Abbes

Keyword(s):

Behavioral Finance ◽

Risk Taking ◽

Cognitive Biases ◽

Generalized Method Of Moments ◽

Mena Region ◽

Content Type ◽

Financial Decisions ◽

Net Interest Margin ◽

Conventional Banks ◽

Overconfidence Bias

Purpose The purpose of this paper is to conduct a behavioral analysis, through overconfidence, in order to understand how this cognitive bias could affect risk taking and inefficiency in Islamic and conventional banks operating in the MENA region. Design/methodology/approach To achieve the objective, the authors considered two overconfidence proxies, namely loan growth rate and net interest margin. Using the generalized method of moments method regressions for panel data, the authors found that the two overconfidence proxies have an effect on the risk exposure and consequently on the efficiency level of Islamic and conventional banks. Findings In general, overconfidence bias causes excessive risk taking and the degradation of the cost efficiency level. Moreover, these effects emerge with a delay of three to four years and have implications that are not too different for both types of banks. Originality/value The main motivation underlying this research study is the relatively new field of behavioral finance way in treating the topic of overconfidence. The particularity of the overconfidence bias topic is its assumption that financial decisions can be influenced by cognitive biases, ignoring the fact of a predetermined risk-return calculation.

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Financing decisions of migrant family businesses: the case of a Ghanaian-owned shop in Kent

Journal of Family Business Management ◽

10.1108/jfbm-11-2017-0037 ◽

2019 ◽

Vol 9 (1) ◽

pp. 24-39 ◽

Cited By ~ 3

Author(s):

Bernard Boateng ◽

Mauricio Silva ◽

Claire Seaman

Keyword(s):

Family Business ◽

Social Factors ◽

Financial Services ◽

Family Businesses ◽

Future Research ◽

Content Type ◽

Financial Decisions ◽

Financing Decisions ◽

Migrant Family ◽

The Uk

Purpose The purpose of this paper is to examine how a Ghanaian migrant family business in Kent makes financial decisions and measures business growth within the framework of Social Network theory and focussing on influences such as family, cultural and social factors. Design/methodology/approach Case study: migrant Ghanaian family business owner in Kent, first generation who migrated to the UK after the year 2000. The business is a small and medium enterprise and running the business as a family. Findings The narrative highlights important aspects of cultural and social factors that are not usually considered in credit analysis or applications for a relationship with a mainstream financial services institution. It is also indicated that family and personal attributes and culture had the most social capital for the shop owner to use or explore in taking her financial decisions. The discussions provide a basic framework for future research. Originality/value There is a gap in the research of Ghanaian migrant family businesses in the UK, in particular of their financial decision making process.

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