scholarly journals THE EFFECT OF COGNITIVE AND EMOTIONAL BIASES ON THE CAPITAL STRUCTURE DECISIONS: A LITERATURE REVIEW

2014 ◽  
Vol 8 (2) ◽  
Author(s):  
Tekin Bilgehan ◽  
Gor Yusuf
Keyword(s):  
Decision Making ◽  
Capital Structure ◽  
Behavioral Finance ◽  
Point Of View ◽  
Decision Makers ◽  
Empirical Literature ◽  
Behavioral Characteristics ◽  
Strategic Choices ◽  
Emotional Process ◽  
The Capital Structure

Each decision-making process is an important cognitive and emotional process which is open to the emotional effect. Individuals make a decision about a future uncertainty either to feel good or maximizing gain by minimizing the loss ratio. Recently, researches in finance have criticized that the capital structure decisions and firms’ funding and strategic choices deviate from the traditional neoclassical paradigm. Furthermore there is a nascent empirical literature that has exposed interesting evidence of the effects of managerial behavioral biases. Managers’ decisions, that to create the capital structure, have a vital importance for the company. The behavioral finance (BF) approach may be revealed useful results in the process of solving decision-makers’ behaviors and thoughts. In this context the purpose of this study is to reveal if the managers are affected by their behavioral characteristics in the process of the financing decision-making, based on the findings of studies in the literature. From this point of view behavioral finance literature, which is about the financing and capital structure decisions, is investigated. As a result, theoretical and empirical analyses, which discussed in the literature, show that managers’ biases play an important role in explaining the capital structure choice.

scholarly journals Capital structure construct: a new approach to behavioral finance

2019 ◽  
Vol 16 (4) ◽  
pp. 86-97
Author(s):  
Jose Anselmo Perez Reyes ◽  
Montserrat Reyna Miranda ◽  
Jorge Vera-Martínez
Keyword(s):  
Capital Structure ◽  
Behavioral Finance ◽  
Latent Variables ◽  
Cognitive Biases ◽  
Decision Makers ◽  
Financial Behavior ◽  
Chief Financial Officers ◽  
New Approach ◽  
Financial Decision ◽  
Construct Dimensions

Within the framework of behavioral finance, this research shows that financial behavior can be assessed as a cognitive construct. Using certain variables, a multidimensional “cognitive finance” construct can thus be established. Through a technological – psychometric type design with descriptive data analysis, a factor analysis is presented to determine which latent variables tend to charge significantly in order to assess the validity of the dimensions comprising the construct of capital structure and explore its dimensions in relation to financial theory. A 44-item questionnaire is adapted and applied to a sample of chief financial officers from diverse public and nonpublic companies in Mexico. The analysis reveals the existence of four construct dimensions consistent with corporate financial theory. The model helps to explain how decision-makers react to uncertainty and environmental conditions, directly affecting the valuation of firm’s losses or earnings. As evidenced by the results, application of the Item Response Theory to the field of behavioral finance could open up new avenues to the study of cognitive biases, involved in the financial decision-making process. Thus, this implies that behavioral finance can also be treated as “cognitive finance.”

Financial Behavior

2017 ◽  
Keyword(s):  
Financial Markets ◽  
Behavioral Finance ◽  
Financial Services ◽  
Well Being ◽  
Decision Makers ◽  
Financial Behavior ◽  
Empirical Literature ◽  
Rapid Pace ◽  
Financial Decision ◽  
User Friendly

This book provides a synthesis of the theoretical and empirical literature on the financial behavior of major stakeholders, financial services, investment products, and financial markets. It offers a different way of looking at financial and emotional well-being and the processing of beliefs, emotions, and behaviors related to money than provided by traditional academic finance. The book provides important insights into how cognitive and emotional biases influence various financial decision makers, services, products, and markets. Because noted scholars and practitioners write on their areas of expertise, readers can gain an in-depth understanding of multiple topic from experts around the world. In today’s financial setting, the discipline of behavioral finance continues to evolve at a rapid pace. This book familiarizes readers with not only the core topics and issues but also the latest trends, cutting-edge research developments, and real-world situations. Additionally, discussion of cognitive and emotional issues is supported with research in the field. Overall, the book covers a critical topic, from the theoretical to the practical, while offering a useful balance of detailed and user-friendly discussions. Those interested in a broad survey will benefit, as will those seeking in-depth coverage of biases and other aspect of behavioral finance. As the seventh book in the Financial Markets and Investment Series, Financial Behavior: Players, Services, Products, and Markets offers a fresh look at this fascinating area of behavioral finance.

scholarly journals Behavioral Biases as An Effective Factor for the Firm Financial Decision-Making: A Literature Review

2016 ◽  
Vol 10 (2) ◽  
pp. 2103-2115
Author(s):  
Bilgehan TEKIN
Keyword(s):  
Decision Making ◽  
Behavioral Finance ◽  
Point Of View ◽  
Decision Making Process ◽  
International Studies ◽  
Negative Effects ◽  
Financial Decisions ◽  
Behavioral Biases ◽  
Effective Decision Making ◽  
The Impact

Decision-making process is a multi-faceted and complex process. Decision making can be defined like a process of choosing from among a number of alternatives. It will not contribute enough to be fully understood and to effective decision making to be addressed only from the rational point of view. Behavioral finance is an integral part of the decision-making process. Individuals can improve their performance by recognizing the biases which discussed in the framework of behavioral finance. Understanding the possible negative effects of biases allows to the individuals to make better choices and they can avoid repeating the expensive errors in future. Result of investigations of behavioral biases on decision-makers in the firms, managerial bias issue has been raised. The studies show the effect of managerial biases on many financial decisions in firms. This paper investigated the role of biases such as overconfidence, loss aversion, optimism, anchoring, narrow framing, self-serving attribution, disposition effect etc. on financial decisions such as investing, financing, equity market, capital structure etc. This study review of 30 international studies related with behavioral corporate finance and behavioral biases that affect financial decisions in firms. The studies were gleaned from Web of Science and Google Scholar. The main contribution of this study to the literature is this study brings out the impact of behavioral biases on financial decisions in the firms by summarizing the previous studies. In this sense, this work also has an assembly quality. Therefore, this is also intended with this study that to transfer the knowledge and intellectual formation about the impact of behavioral bias on the financial decisions. In this paper, most important behavioral biases in the behavioral finance literature will be addressed.

scholarly journals Evaluación comparativa multifuncional de sistemas agrarios mediante AHP: Aplicación al olivar ecológico, integrado y convencional de Andalucía

2011 ◽  
Vol 5 (9) ◽  
pp. 27 ◽  
Author(s):  
Carlos Parra López ◽  
Javier Calatrava Requena ◽  
Tomás De Haro Giménez
Keyword(s):  
Decision Making ◽  
Farming Systems ◽  
Point Of View ◽  
Decision Makers ◽  
Analytic Hierarchy ◽  
Complex Decision Making ◽  
Olive Groves ◽  
Complex Decision ◽  
Hierarchy Process

Even though multifunctionality concept is reflected, implicit or explicitly, in the design of actual agrarian policies, its consideration when analysing and assessing farming systems is relatively limited in the scientific literature. Analytic Hierarchy Process (AHP) is proposed with this aim. AHP is a multicriteria discrete decision support technique that is used in complex decision making. This methodology is stated jointly with a proposed procedure to measure relative agreement among decision makers and uniformity of alternatives’ performances in group decision making. Finally AHP is implemented in the assessment of organic, integrated and conventional olive groves in Andalusia considering criteria of a different nature – economic, technical, sociocultural and environmental –. The final purpose is determining the more interesting growing techniques from a holistic point of view for all the society in the medium/long-term on the basis of knowledge of experts on olive.

scholarly journals USING THE CONCEPT OF TRANSACTION COSTS IN CAPITAL STRUCTURE MANAGEMENT

2020 ◽  
pp. 71-75
Author(s):  
Svetlana Viktorovna Lepeshkina
Keyword(s):  
Decision Making ◽  
Capital Structure ◽  
Transaction Costs ◽  
Average Cost ◽  
Cost Of Capital ◽  
Weighted Average ◽  
Point Of View ◽  
Efficiency Assessment ◽  
Modern Period ◽  
The Cost

The article discusses the theoretical aspects of issues related to the assessment of capital, the formation of its structure from the point of view of making management decisions in cost formation on its attraction and maintenance. The concept of “capital” is clarified from the point of view of its formation and subsequent efficiency assessment. The approach to the formation of capital structure concepts of the modern period on the development basis is justified. The method of estimating the cost of capital and the formation of the target capital structure, based on the inclusion of transaction costs in the cost of capital, which allows you to more accurately determine the size of these costs in relation to the amount of equity and more accurately generate the weighted average cost of capital of the organization. The empirical nature of the study allows us to use the proposed method of forming the capital structure in relation to various (individual) conditions of the organization’s functioning, followed by clarification of the parameters of decision-making based on the set goals of the organization’s activities.

scholarly journals Advanced Mathematical Business Strategy Formulation Design

Mathematics ◽  
2020 ◽  
Vol 8 (10) ◽  
pp. 1642
Author(s):  
Song-Kyoo (Amang) Kim
Keyword(s):  
Decision Making ◽  
Theoretical Model ◽  
Analytical Model ◽  
Business Strategy ◽  
Matrix Form ◽  
Decision Makers ◽  
Strategic Decision ◽  
Strategic Decision Making ◽  
Strategic Choices ◽  
Strategy Formulation

This paper deals with the explicit design of strategy formulations to make the best strategic choices from a conventional matrix form of representing strategic choices. The explicit strategy formulation is an analytical model that is targeted to provide a mathematical strategy framework to find the best moment for strategy shifting to prepare rapid market changes. This theoretical model could be adapted into practically any strategic decision making situation when a strategic formulation is described as a matrix form with quantitative measured decision parameters. Analytically tractable results are obtained by using the fluctuation theory and these results are able to predict the best moments for changing strategies in a matrix form. This research can help strategy decision makers who want to find the optimal moments of shifting present strategies.

Mathematical problems of decision-making in organizational systems

2019 ◽  
Author(s):  
Андрей Тараканов ◽  
Andrei Tarakanov
Keyword(s):  
Decision Making ◽  
Complex Structure ◽  
Sufficient Conditions ◽  
Point Of View ◽  
Decision Makers ◽  
Organizational Systems ◽  
Current State ◽  
Information Interaction ◽  
Mathematical Problems ◽  
Theoretical Results

The theory of decision-making in organizational systems with complex structure in the conditions of conflict and uncertainty is stated. A review of the current state of the theory is given. Systems are studied: hierarchical, coalition and coalition-hierarchical (hybrid). The main attention in the process of designing mathematical models of systems is paid to the description of ways of information interaction of decision makers. This takes into account the options of their unfavorable (conflict) and benevolent “attitude” to each other. Two approaches to decision-making are proposed: 1) decision-making from the point of view of the selected participant of the system based on the method of penalty functions and obtaining the necessary conditions of optimality; 2) decision-making in the form of equilibria based on special principles of optimality, constructed using the principles of Nash, Pareto, Geoffrion, Stackelberg, Slater, threats-counter-threats, absolute active equilibrium and obtaining sufficient conditions of optimality. Theoretical results are illustrated by model examples. For researchers, graduate students and students involved in theoretical and practical issues of decision-making in complex systems.

scholarly journals Impact of Industry 4.0 on decision-making in an operational context

2021 ◽  
Vol 16 (4) ◽  
pp. 500-514
Author(s):  
F. Rosin ◽  
P. Forget ◽  
S. Lamouri ◽  
R. Pellerin
Keyword(s):  
Decision Making ◽  
Industry 4.0 ◽  
New Technologies ◽  
Production Systems ◽  
Point Of View ◽  
Decision Makers ◽  
Process Improvements ◽  
Proposed Model ◽  
Operational Systems ◽  
Decision Making Processes

The implementation of Industry 4.0 technologies suggests significant impacts on production systems productivity and decision-making process improvements. However, many manufacturers have difficulty determining to what extent these various technologies can reinforce the autonomy of teams and operational systems. This article addresses this issue by proposing a model describing different types of autonomy and the contribution of 4.0 technologies in the various steps of the decision-making processes. The model was confronted with a set of application cases from the literature. It emerges that new technologies' improvements are significant from a decision-making point of view and may eventually favor implementing new modes of autonomy. Decision-makers can rely on the proposed model to better understand the opportunities linked to the fusion of cybernetic, physical, and social spaces made possible by Industry 4.0.

The capital structure puzzle – evidence from Indian energy sector

2019 ◽  
Vol 13 (1) ◽  
pp. 2-23 ◽  
Author(s):  
Anindita Chakrabarti ◽  
Ahindra Chakrabarti
Keyword(s):  
Capital Structure ◽  
Negative Relationship ◽  
Energy Sector ◽  
Empirical Literature ◽  
Content Type ◽  
Factors Affecting ◽  
Tax Shield ◽  
Asset Turnover ◽  
Energy Companies ◽  
The Capital Structure

Purpose The purpose of this paper is to determine the factors affecting the capital structure of companies engaged in the Indian energy sector. Design/methodology/approach Capital structure theories and empirical literature have been reviewed to formulate propositions concerning the factors/variables determining the capital structure of Indian energy companies. The examination is done using panel data techniques for the sample 141 companies operating in the Indian energy sector. Findings The results show firms’ age, asset turnover ratio, liquidity and firms’ size to be significant determinants of capital structure for the Indian energy companies, while profitability, debt service capacity, sales growth, non-debt tax shield and tangibility ratio to be insignificant determinants. Historically, profitability has shared a significantly negative relationship with debt ratio; however, the relation here is not significant. Research limitations/implications The focus of the current study is on Indian energy sector, the results obtained will not be applicable for other sectors. Originality/value The current research gives an insight into the determinants of capital structure of the companies engaged in the Indian energy sector, which are mostly overlooked due to the laws, policies and regulations governing the sector as a whole.

Sign in / Sign up

Export Citation Format

Share Document