CEO emotional bias and dividend policy: Bayesian network method

• Authors: Azouzi Mohamed Ali , Jarboui Anis
• Languages of publication: EN

Abstracts

EN

This paper assumes that managers, investors, or both behave irrationally. In addition, even though scholars have investigated behavioral irrationality from three angles, investor sentiment, investor biases and managerial biases, we focus on the relationship between one of the managerial biases, overconfidence and dividend policy. Previous research investigating the relationship between overconfidence and financial decisions has studied investment, financing decisions and firm values. However, there are only a few exceptions to examine how a managerial emotional bias (optimism, loss aversion and overconfidence) affects dividend policies. This stream of research contends whether to distribute dividends or not depends on how managers perceive of the company’s future. I will use Bayesian network method to examine this relation. Emotional bias has been measured by means of a questionnaire comprising several items. As for the selected sample, it has been composed of some100 Tunisian executives. Our results have revealed that leader affected by behavioral biases (optimism, loss aversion, and overconfidence) adjusts its dividend policy choices based on their ability to assess alternatives (optimism and overconfidence) and risk perception (loss aversion) to create of shareholder value and ensure its place at the head of the management team.

Keywords

EN

Emotional bias; corporate finance; optimism; overconfidence; loss aversion; dividend policy; Bayesian network

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Prague Development Center, Czech Republic
• Journal: Business and Economic Horizons
• Year: 2012
• Volume: 7
• Issue: 1
• Pages: 1-18

Contributors

author

Azouzi Mohamed Ali

author

Jarboui Anis

• Business and Economic Horizons, redakce, Prague Development Center s.r.o., Bořivojova 1081 / 40, 130 00, Prague 3 - Žižkov, Czech Republic