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Interactions of Financial Risk Tolerance, Internal Fit, External Fit and Personality Traits on Corporate Investment Behaviour

Year 2023, Volume: 23 Issue: 2, 375 - 398, 04.07.2023
https://doi.org/10.18037/ausbd.1221129

Abstract

Explaining corporate investment behaviour (CIB) is crucial for companies, investors and policy makers. The relationship between financial risk taking and investment decision has been studied in detail on an individual level. However, an attempt to assess financial risk taking behaviour on an organizational level is not encountered in literature. This study fills the gap by attempting to measure corporate financial risk tolerance (CFRT) with data from 307 production companies and employs hypothesis testing as a confirmatory analysis in a theoretical framework from literature. The dynamics of Big 5 personality traits of owners/top management, such as openness, conscientiousness, extroversion, agreeableness, neuroticism, which is another area of interest in investment theory, is also included in the study. The models to test the hypotheses are proposed by using CFRT and Big 5 as independent variables to explain corporate investment behaviour (CIB). The results of this study indicate that Big 5 traits of top management are not significantly related with CIB, yet CFRT is. Subsequently items impacting CIB and financial risk tolerance identified from literature are classified as internal (IFFI) and external fit for investment (EFFI) and are incorporated as two composite moderating variables. As a result, the model fit improves with both IFFI and EFFI for CFRT, however for Big 5, only conscientiousness trait becomes significant in the moderation of EFFI.

References

  • Aggarwal, R., Kearney, C. and Lucey, B. (2012). Gravity and culture in foreign portfolio investment. Journal of Banking & Finance, 36(2), 525-538. https://doi.org/10.1016/j.jbankfin.2011.08.007
  • Ayadi, M., Kusy, M. I., Pyo, M. and Trabelsi, S. (2015). Corporate social responsibility, corporate governance, and managerial risk-taking. Corporate Governance, and Managerial Risk-Taking (January 9, 2015). http://dx.doi.org/10.2139/ssrn.2547576
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  • Bikhchandani, S. and Sharma, S. (2000). Herd behavior in financial markets. IMF Staff papers, 47(3), 279-310. Retrieved from https://www.imf.org/external/pubs/ft/wp/2000/wp0048.pdf
  • Bhardwaj, A., Dietz, J. and Beamish, P. W. (2007). Host country cultural influences on foreign direct investment. Management International Review, 47(1), 29-50. doi:10.1007/s11575-007-0003-7.
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  • Gambetti, E. and Giusberti, F. (2019). Personality, decision-making styles and investments. Journal of Behavioral and Experimental Economics, 80, 14-24. https://doi.org/10.1016/j.socec.2019.03.002
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Kurumsal Yatırım Sürecinde Finansal Risk Toleransı, Dahili ve Harici Uygunluk ile Kişilik Etkileşimi

Year 2023, Volume: 23 Issue: 2, 375 - 398, 04.07.2023
https://doi.org/10.18037/ausbd.1221129

Abstract

Kurumsal yatırım davranışını (KYD) açıklamak şirketler, yatırımcılar ve politika yapıcılar için çok önemlidir. Finansal risk alma ve yatırım kararı arasındaki ilişki, bireysel düzeyde ayrıntılı olarak incelenmiştir. Ancak finansal risk alma davranışını örgütsel düzeyde değerlendirme girişimine literatürde rastlanmamıştır. Bu çalışma, kurumsal finansal risk toleransını (KFRT), 307 üretim şirketinden alınan verilerle ölçmeye çalışarak boşluğu doldurmayı hedeflemektedir. Yatırım teorisinin bir diğer ilgi alanı olan beş faktör kişilik modeli dinamikleri de şirket sahiplerinin/üst yönetiminin açıklık, sorumluluk, dışadönüklük, uyumluluk, duygusal denge özellikleri şeklinde çalışmaya dahil edilmiştir. Hipotezleri test edecek modeller, kurumsal yatırım davranışını (KYD) bağımlı, KFRT ve beş faktör kişilik modeli özelliklerini bağımsız değişkenler olarak kullanarak önerilmiştir. Sonuçlarımız, üst yönetimin beş faktör kişilik modeli özelliklerinin KYD ile anlamlı bir ilişki içinde olmadığını, ancak KFRT'nin anlamlı bir şekilde KYD’yi açıkladığını göstermektedir. Takiben, şirketler için KYD'yi ve finansal risk tutumunu etkileyen öğeler dahili ve harici yatırıma uygunluk (YİDU, YİHU) olarak literatür üzerinden sınıflandırılmış ve iki kompozit düzenleyici değişken olarak modele eklenmiştir. Neticede, KFRT için hem YİDU hem de YİHU’nun eklenmesiyle model uyumluluğu artarken, beş faktör kişilik özellikleri için, YİHU'nun moderasyonunda sadece sorumluluk özelliği anlamlı hale gelmiştir.

References

  • Aggarwal, R., Kearney, C. and Lucey, B. (2012). Gravity and culture in foreign portfolio investment. Journal of Banking & Finance, 36(2), 525-538. https://doi.org/10.1016/j.jbankfin.2011.08.007
  • Ayadi, M., Kusy, M. I., Pyo, M. and Trabelsi, S. (2015). Corporate social responsibility, corporate governance, and managerial risk-taking. Corporate Governance, and Managerial Risk-Taking (January 9, 2015). http://dx.doi.org/10.2139/ssrn.2547576
  • Bartlett, M. S. (1954). Significance test for sphericity of a normal n-variate distribution. Journal of the Royal Statistical Society, 16, 296-298. https://doi.org/10.1111/j.2517-6161.1954.tb00174.x
  • Bernanke, B. S. (1983). Irreversibility, uncertainty, and cyclical investment. The quarterly journal of economics, 98(1), 85-106. https://doi.org/10.2307/1885568
  • Bikhchandani, S., Hirshleifer, D. and Welch, I. (1992). A theory of fads, fashion, custom, and cultural change as informational cascades. Journal of political Economy, 100(5), 992-1026. Retrieved from https://www.jstor.org/stable/2138632
  • Bikhchandani, S. and Sharma, S. (2000). Herd behavior in financial markets. IMF Staff papers, 47(3), 279-310. Retrieved from https://www.imf.org/external/pubs/ft/wp/2000/wp0048.pdf
  • Bhardwaj, A., Dietz, J. and Beamish, P. W. (2007). Host country cultural influences on foreign direct investment. Management International Review, 47(1), 29-50. doi:10.1007/s11575-007-0003-7.
  • Camerer, C. F. and Loewenstein, G. (2004). Behavioral economics: Past, present, future. Advances in behavioral economics, 1, 3-51. https://doi.org/10.1515/9781400829118-004
  • Catell, R. B. (1978). The scientific use of factor analysis. Behavioral and Life Sciences. New York and London: Plenum Press. doi: 10.1007/978-1-4684-2262-7.
  • Chenery, H. B. (1952). Overcapacity and the acceleration principle. Econometrica: Journal of the Econometric Society, 1-28. https://doi.org/10.2307/1907804
  • Chitra, K. and Sreedevi, V. R. (2011). Does personality traits influence the choice of investment?. IUP Journal of Behavioral Finance, 8(2), 47. Retrieved from https://ssrn.com/abstract=2031414
  • Clark, J. M. (1917). Business acceleration and the law of demand: A technical factor in economic cycles. Journal of political economy, 25(3), 217-235. https://doi.org/10.1086/252958
  • Cohen, R. J. and Swerklik, M. E. (1999). Psychological testing and assessment: An introduction to tests and measurement (4th ed.). Mayfield Publishing Co. Retrieved from https://psycnet.apa.org/record/1996-97180-000
  • Cohen, J., Cohen, P., West, S. G. and Aiken, L. S. (2003). Applied multiple regression/correlation analysis for the behavioral sciences (3rd ed.). Mahwah, NJ: Erlbaum. https://doi.org/10.4324/9781410606266
  • Comrey, A. L. and Lee, H. B. (1992). Interpretation and application of factor analytic results. Comrey AL, Lee HB. A first course in factor analysis, 2, 1992. https://doi.org/10.4324/9781315827506
  • Cordell, D. M. (2001). RiskPACK: How to evaluate risk tolerance. Journal of financial planning, 14(6), 36. Retrieved from https://www.proquest.com/docview/217566941?pq-origsite=gscholar&fromopenview=true
  • Devenow, A. and Welch, I. (1996). Rational herding in financial economics. European Economic Review, 40(3-5), 603-615. https://doi.org/10.1016/0014-2921(95)00073-9
  • Dixit, R. K. and Pindyck, R. S. (1994). Investment under uncertainty. Princeton university press. Retrieved from https://msuweb.montclair.edu/~lebelp/DixitPindyck1994.pdf
  • Duesenbery, J.S. (1959) Business Cycles and Economic Growth, Review by: M. L. Burste, Journal of Business, 32, 389-390. https://doi.org/10.1177/000271626032800158
  • Fabrigar, L. R. and Wegener, D. T. (2012). Structural equation modeling. In Applied multivariate statistics for the social sciences ( pp. 549-594). Routledge. https://doi.org/10.4324/9780203843130
  • Farrell, J. and Saloner, G. (1985). Standardization, compatibility, and innovation. the RAND Journal of Economics, 70-83. https://doi.org/10.2307/2555589
  • Field, A. (2009). Discopering statistics using SPSS, (3rd ed.). https://doi.org/10.1002/bjs.7040
  • Gaganis, C., Hasan, I., Papadimitri, P. and Tasiou, M. (2019). National culture and risk-taking: Evidence from the insurance industry. Journal of Business Research, 97, 104-116. https://doi.org/10.1016/j.jbusres.2018.12.037
  • Gambetti, E. and Giusberti, F. (2019). Personality, decision-making styles and investments. Journal of Behavioral and Experimental Economics, 80, 14-24. https://doi.org/10.1016/j.socec.2019.03.002
  • Garber, P. M. (2001). Famous first bubbles: The fundamentals of early manias. MIT Press. Retrieved from https://www.uv.mx/personal/clelanda/files/2013/02/Garber-2000-Famous-first-bubbles.pdf
  • Gençöz, T. and Öncül, Ö. (2012). Examination of personality characteristics in a Turkish sample: Development of basic personality traits inventory. The Journal of general psychology, 139(3), 194-216. doi: 10.1080/00221309.2012.686932
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Details

Primary Language English
Subjects Behavioural Finance, Finance, Financial Forecast and Modelling, Strategy, Management and Organisational Behaviour (Other)
Journal Section Articles
Authors

Cem Ünlüakın 0000-0003-3147-7197

Hakkı Aktaş 0000-0002-7336-2446

Publication Date July 4, 2023
Submission Date December 19, 2022
Published in Issue Year 2023 Volume: 23 Issue: 2

Cite

APA Ünlüakın, C., & Aktaş, H. (2023). Interactions of Financial Risk Tolerance, Internal Fit, External Fit and Personality Traits on Corporate Investment Behaviour. Anadolu Üniversitesi Sosyal Bilimler Dergisi, 23(2), 375-398. https://doi.org/10.18037/ausbd.1221129

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