IMPACT OF ANCHORING BIAS ON CORPORATE PROFITS AND SHAREHOLDERS WEALTH

Year 2011, Volume: 3 Issue: 2, 105 - 115, 01.12.2011

Ibrahim Emre Karaa

Abstract

Behavioral Corporate Finance studies mainly concerned with irrationality in sense of overconfidence and optimism especially about the firms which are already take place in stock exchange. In this paper, I examined impacts of the fixed opinion or a common belief of the statement “I never borrow money” which should be considered as a judgemental bias under the concept of anchoring in relatively small firms. By using artificial dataset, I explicitly show the impact of this bias in borrowing that effect profitability of the company, shareholders wealth and costly time loses

Keywords

Behavioral Corporate Finance, Corporate Decision making, Irrationality

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