scholarly journals Irrationality of managers’ behavior in corporate financial decision making

2021 ◽  
Vol 9 (5) ◽  
pp. 51-56
Author(s):  
Marcin Banaszek
Keyword(s):  
Decision Making ◽  
Corporate Finance ◽  
Behavioral Finance ◽  
Decision Making Process ◽  
Financial Decisions ◽  
Financial Decision Making ◽  
Irrational Behavior ◽  
Behavioral Aspects ◽  
Financial Decision ◽  
Behavioral Corporate Finance

Purpose of the study: The subject of consideration is the behavioral aspects of corporate finance. The consideration is devoted to the basic inclinations of psychological nature characteristic of managers. The main purpose of the article is to characterize the irrational behavior of managers in the process of financial decision-making in the enterprise. Methodology: The paper was prepared with the use the critical literature review method mainly in the field of behavioral corporate finance. Main findings: The discussion shows that behavioral corporate finance focuses mainly on cognitive and motivational-emotional processes in managers, which may occur in various decision areas within which managers make choices. There are three groups of psychological phenomena and inclinations that are characteristic of managers who manage business entities, namely predispositions to systematic inference errors, heuristics, and the presentation effect. Application of the study: The presented article refers to the irrational behavior of managers in the process of making financial decisions in the company. It implies reflections in such scientific fields as, among others, economics and finance, management and psychology. The use of the tools of psychology allows analyzing the problems of financial decision-making of managers in the enterprise, noticing in them some deviations from rationality that can affect the efficiency of the enterprise. The content of the article can be useful for managers making financial decisions in an enterprise. Originality/Novelty of the study: Behavioral finance is a young discipline of finance, the scientific output of which in Poland is still small. Behavioral aspects are just beginning to gain importance in the decision-making process, especially the financial one. The tendencies of managers to irrationality in the decision-making process presented in this article allow us to better understand the errors, psychological factors that may cause wrong decisions, which in turn may translate into poorer financial condition of the whole enterprise. The article can inspire further research and inquiry in the field of behavioral finance and contribute to other interesting scientific studies.

scholarly journals How Behavioral Aspects Influence the Sustainable Financial Decisions of Shareholders: An Empirical Study and Proposal for a Relevant Decision-Making Concept

2020 ◽  
Vol 12 (12) ◽  
pp. 4813
Author(s):  
Mariana Sedliačiková ◽  
Patrik Aláč ◽  
Mária Moresová
Keyword(s):  
Decision Making ◽  
Behavioral Finance ◽  
Financial Behavior ◽  
Decision Making Process ◽  
Financial Decision Making ◽  
Emotional Factors ◽  
Furniture Manufacturing ◽  
Behavioral Aspects ◽  
Financial Decision ◽  
The Impact

Behavioral finance is an area or sub-discipline of behavioral economics that examines the real financial behavior and decision-making of people, including the knowledge of psychology and sociology. The objective of this paper was to identify and investigate the impact of significant cognitive, psychological and emotional factors affecting the financial decision-making of the shareholders of woodworking and furniture manufacturing and trading enterprises. This could lead to the design of decision-making concepts which take into account not only cognitive but also psychological and emotional factors and their influences on decision-making process, which could positively affect the sustainable development of the aforementioned types of enterprises. The mapping of the addressed issue was carried out by means of an empirical survey in the practice of the Slovak woodworking and furniture manufacturing and trading enterprises in the form of a questionnaire. The results of the survey were evaluated by descriptive, graphical and mathematical-statistical methods. Conclusions and recommendations were formulated based on the identification of key behavioral aspects (knowledge, security, freedom and sadness), the implementation of which could contribute to eliminating negative deviations and errors in the financial decision-making process of shareholders of woodworking and furniture manufacturing and trading enterprises.

PENGARUH FINANCIAL ATTITUDE DAN FINANCIAL KNOWLEDGE TERHADAP KEPUTUSAN KEUANGAN PADA PEMILIK USAHA KECIL DAN MENENGAH (UKM) DI PULAU LOMBOK: SUATU PERSPEKTIF BEHAVIORAL FINANCE

2020 ◽  
Vol 6 (2) ◽  
pp. 166-178
Author(s):  
Siti Aisyah Hidayati ◽  
Sri Wahyulina ◽  
Embun Suryani
Keyword(s):  
Decision Making ◽  
Behavioral Finance ◽  
Financial Management ◽  
Sampling Technique ◽  
Provincial Government ◽  
Financial Knowledge ◽  
Financial Attitudes ◽  
Financial Decisions ◽  
Financial Decision Making ◽  
Financial Decision

This study aims to analyze the effect of Financial Attitude and Financial Knowledge on financial decisions on Small and Medium Business Owners (UKM) on Lombok Island. The theoretical contribution of this research is expected to contribute to science and the development of behavioral finance theories related to financial decision making in Small and Medium Enterprises (SMEs). It is also expected that behavioral finance will be the subject of financial management courses. Furthermore, the practical contribution of this research is expected to provide input, suggestions and recommendations to the policy maker of the NTB Provincial Government in making policies related to the development of SMEs. This research is a quantitative approach based research, with the type of explanatory research. The study population is all SMEs in the island of Lombok. The sampling technique is done by using Non probability sampling, which uses judgment sampling, which is choosing SMEs that are engaged in the pottery industry and have already exported. From the existing population, there are 35 (thirty-five) SMEs that can be taken as samples. Respondents in this study are the owners of each of these UKM. Data collection techniques used in this study were using a questionnaire. To achieve research objectives and hypothesis testing, the data obtained will be processed according to needs using GSCA (Generalized Structured Component Analysis) statistical tools.The results showed that Financial Attitudes had a positive and significant effect on financial decision making by SME owners and owners. This means that the better the Financial Attitudes owned by SME owners, the bolder they are in making financial decisions. Financial Knowledge has a positive and significant impact on financial decision making by SME owners and owners. This means that the better the Financial Knowledge possessed by SME owners, the bolder the financial decisions will be

scholarly journals THE EFFECT OF FINANCIAL ATTITUDE AND FINANCIAL KNOWLEDGE ON COMPANY PERFORMANCE WITH FINANCIAL DECISIONS AS INTERVENING VARIABLES: A BEHAVIORAL FINANCE PERSPECTIVE

2021 ◽  
Vol 10 (1) ◽  
pp. 1
Author(s):  
Siti Aisyah Hidayati ◽  
Sri Wahyulina ◽  
Embun Suryani
Keyword(s):  
Decision Making ◽  
Behavioral Finance ◽  
Financial Management ◽  
Financial Knowledge ◽  
Company Performance ◽  
Financial Decisions ◽  
Financial Decision Making ◽  
Financial Decision ◽  
The Impact ◽  
Lombok Island

This study aims to analyze the effect of Financial Attitude and Financial Knowledge on Company Performance with Financial Decision as an Intervening Variable on Small and Middle Enterprises Owners in Lombok Island. This research's theoretical contribution is expected to contribute to the knowledge and development of behavioral finance theory related to Financial Decision-making and Company Performance in Small and Middle Enterprises. Besides, it is also hoped that behavioral finance will become a subject in the financial management course. Furthermore, this research's practical contribution is expected to provide input, suggestions, and recommendations to the NTB Provincial Government's policymakers in making policies related to SMEs' development.               This research is research based on a quantitative approach, with this type of explanatory research. The study population was all SMEs in Lombok Island. The sampling was carried out by non-probability selection, namely using judgment sampling, selecting SMEs engaged in the pottery industry and had already exported. Of the existing population, there are 35 (Thirty-Five) SMEs that can be taken as samples. Respondents in this study are the owners of each of these SMEs. The data collection technique used in this study was to use a questionnaire. The data obtained will be processed as needed by using GSCA (Generalized Structured Component Analysis) statistical tools to achieve the research objectives and hypothesis testing.               The results showed that Financial Attitude and Financial Knowledge had a positive and significant effect on Financial Decision-making. Financial Decisions did not mediate the impact of Financial Attitude and Financial Knowledge on Company Performance, and Financial Decisions had a negative and significant effect on Company Performance. This circumstance is also motivated by the age of most of the respondents of productive age, mostly male, most of the education level is high school, and the length of business is more than 10 (ten) years. Keywords: Financial Attitude, Financial Knowledge, Financial Decision, Company Performance

scholarly journals Impact of financial statements for financial decision-making

2020 ◽  
Vol 5 (2) ◽  
Author(s):  
Saddeq Abdulshakour
Keyword(s):  
Decision Making ◽  
Relative Weight ◽  
Financial Statements ◽  
Decision Makers ◽  
Financial Statement ◽  
Financial Decisions ◽  
Financial Decision Making ◽  
Vision 2030 ◽  
Study Population ◽  
Financial Decision

The study aimed to know the effects of analysis of financial statements on financial decisions, and the degree of benefit from them, and to identify what financial statements, what is its importance for the institutions within the framework of the Kingdom's Vision 2030 of ideas and trends, and to identify the contribution of financial statement analysis to financial decision-making. The study was based on the descriptive and analytical approach, and the study population consisted of all financial decision makers. The study was based on a simple random method (70) of financial decision makers. The study was based on the questionnaire and consisted of the following axes (financial statements in companies, financial decision-making, the effects of analysis of financial statements on financial decision-making). The study came out with a number of results, the most important of which are: There is approval by the respondents to all paragraphs of the first axis "financial statements in companies", with a relative weight of 82.8%. There is an agreement by the respondents on all paragraphs of the second axis "making financial decisions in companies", with a relative weight of 81.3%. There is strong approval by the respondents on all paragraphs of the third axis "the effects of analysis of financial statements on financial decision-making", with a relative weight of 86.4%. The financial statements are a key tool to know the financial position of the company, so they must be accurate and reliable before being published by management. The lack of credibility in the financial statements leads to mistrust in the company by investors, and does not give them the possibility to diagnose and make sound decisions. In light of the previous results, the study recommended the following: • Organizing several forums, conferences and forums to clarify the mechanism of preparing the financial statements and how to analyze them, and the need to raise awareness of financial decision makers about the importance of financial statements in the financial decision-making process.

scholarly journals Gender Differences in Financial Decisions

2018 ◽  
Vol 11 (1) ◽  
pp. 21-27
Author(s):  
Jeetendra Dangol
Keyword(s):  
Gender Differences ◽  
Decision Making ◽  
Financial Literacy ◽  
Sampling Technique ◽  
Financial Decisions ◽  
Financial Decision Making ◽  
Financial Decision ◽  
Convenience Sampling ◽  
Risk Taker ◽  
Survey Questionnaires

This paper examines the gender differences in financial decision-making of university students who are young, single, childless individuals that have at least average financial literacy and very small or no income. This paper is based on the survey questionnaires developed by Grable and Lytton (2003), distributed and collected from 100 students (50 men and 50 women) by using convenience sampling technique. The study finds that men and women differ in their financial decision. Women are less risk taker than men in financial decision-making; it indicates that women prefer to safer investment.

Modelling the Effects of Financial Services Advertising on Financial Product Purchase: An Empirical Validation

2019 ◽  
Vol 23 (4) ◽  
pp. 418-431
Author(s):  
Pallavi Dogra ◽  
Rishi Raj Sharma
Keyword(s):  
Decision Making ◽  
Factor Analysis ◽  
Financial Literacy ◽  
Financial Services ◽  
Service Providers ◽  
Decision Making Process ◽  
Celebrity Endorsement ◽  
Financial Decision Making ◽  
Perceived Reality ◽  
Financial Decision

The main aim of the study is to find the effect of the financial advertisement on the respondent’s information selection, processing and analysing it while making the financial purchase decisions. The study identified the important factors that affect the investment decision-making process and explored them by using the exploratory factor analysis. The conceptual model has been tested using the AMOS SEM software. The factor analysis identified the four important factors that are affecting the financial decision-making, that is, financial literacy, celebrity endorsement, perceived reality and entertainment. The hypothesis testing reveals that advertisement, perceived reality and entertainment are affecting the information processing and financial decision-making process, whereas financial literacy and celebrity endorsement do not have significant effects on the financial product purchase. The results are useful for the advertisers, policy makers and the financial service providers so as to increase the sale of financial products by focusing on the variables extracted by the research.

scholarly journals FINANCIAL DECISION MAKING SELF-EFFICACY IN COGNITIVELY AND FINANCIALLY VULNERABLE OLDER ADULTS

2019 ◽  
Vol 3 (Supplement_1) ◽  
pp. S477-S478
Author(s):  
Evan Z Gross ◽  
Rebecca J Campbell ◽  
LaToya Hall ◽  
Peter Lichtenberg
Keyword(s):  
Alzheimer’S Disease ◽  
Older Adults ◽  
Alzheimer's Disease ◽  
Decision Making ◽  
Cognitive Impairment ◽  
Self Efficacy ◽  
Clinical Samples ◽  
Financial Decisions ◽  
Financial Decision Making ◽  
Financial Decision

Abstract Financial decision making self-efficacy (FDMSE) is a novel construct that may influence how older adults make financial decisions. Our previous research with a community sample of older adults demonstrated that cognitive functioning and suspected history of financial exploitation were both associated with low FDMSE. We sought to replicate these findings in two clinical samples of older adults: people with mild cognitive impairment (MCI) or probable Alzheimer’s disease (PAD) and current victims of scams or exploitation as determined by a financial coach. Samples were obtained from the Michigan Alzheimer’s Disease Center and a financial coaching intervention study. All participants completed a 4-item FDMSE measure. One-way ANOVAs, t-tests and chi-square tests were conducted to test for group differences with controls on demographics. There was a main effect of cognitive status on FDMSE, F(2,138) = 8.10, p < .001, which was driven by higher FDMSE in the healthy group (N = 63) than the MCI (N = 76) or PAD (N = 28) groups. Similarly, scam victims (N = 25) had significantly lower FDMSE than non-exploited (N = 25) peers, t(48)=2.33, p < 05. Cognitive impairment and current financial scams are both associated with low FDMSE levels. Low FDMSE may exacerbate cognitive and psychosocial vulnerabilities that contribute to risk for poor financial decisions among older adults. Future interventions to enhance FDMSE may help older adults make better decisions despite changes in thinking abilities or previous negative financial experiences.

Review of Family Financial Decision Making: Suggestions for Future Research and Implications for Financial Education

2017 ◽  
Vol 28 (2) ◽  
pp. 253-267 ◽  
Author(s):  
Jinhee Kim ◽  
Michael S. Gutter ◽  
Taylor Spangler
Keyword(s):  
Decision Making ◽  
Decision Process ◽  
Family System ◽  
Financial Education ◽  
Future Research ◽  
Financial Decisions ◽  
Individual Level ◽  
Financial Decision Making ◽  
Financial Decision ◽  
The Individual

This article reviews the theories and literature in intrahousehold financial decisions, spousal partners and financial decision making, family system and financial decision process, children, and financial decisions. The article draws conclusions from the literature review and discusses directions for future research and educational programs. Most financial education and counseling takes place at the individual level, whereas financial decisions take place at household and intrahousehold levels. Family members, spouses/partners, children, and others play a key role in individuals’ financial decisions. The article proposes the key programmatic implications for financial professionals and educators that need to be integrated into financial education and counseling. Understanding the unique dynamics of family financial decision making would help create effective educational and counseling strategies for the whole families.

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