CORPORATE FINANCIAL DECISIONS IN THE CONTEXT OF BEHAVIORAL CORPORATE FINANCE: A LITERATURE REVIEW

Year 2018, Issue: 20, 33 - 50, 10.01.2018

Esra Bulut , Bünyamin Er

https://doi.org/10.18092/ulikidince.323871

Cited By: 2

Abstract

Traditional perspective in corporate finance considers the managers as rational individuals who try to
increase expected utility. In this sense, managers are assumed to behave unbiased in their decisions.
However, recently, there is a criticism about this assumption for not taking into consideration cognitive
biases for the corporate financial decisions and this criticism is supported with empirical findings that the
cognitive biases can be effective on corporate financial decisions. In this context, behavioral corporate
finance is emerging as a new and significant research area by focusing on managerial irrationality.
Behavioral corporate finance is about corporate financial decisions with the focus of behavioral biases
without ignoring the traditional approaches. In the literature, overconfidence bias is basically used;
however, herding behavior, loss aversion and anchoring are also used as managerial biases. Investigations
have attempted to explain the capital structure decisions of these prejudices, dividend distribution,
investment decisions and the effects on cash holding policies. This work is a comprehensive literature
review which aims to explain the empirical findings about how behavioral biases affect corporate financial
decisions and thus to draw attention to the importancy of these works for the future researches in this
area. 

Keywords

Behavioral corporate finance, corporate financial decisions, managerial irrationality, cognitive biases

DAVRANIŞSAL KURUMSAL FİNANS EKSENİNDE KURUMSAL FİNANSAL KARARLAR: BİR LİTERATÜR DEĞERLENDİRMESİ

Abstract

Kurumsal finansta geleneksel bakış açısı, yöneticileri rasyonel ve beklenen faydayı artırmaya çalışan bireyler
olarak değerlendirmektedir. Bu anlamda yöneticilerin kararlarında önyargısız davrandıkları varsayılmaktadır.
Günümüzde ise bu yaklaşım önemli eleştirilere uğramış ve bazı bilişsel önyargıların kurumsal finansal
kararlar üzerinde etkili olabileceği düşüncesi yapılan çalışmalardan elde edilen ampirik bulgularla
desteklenmiştir Bu eksende ortaya çıkan davranışsal kurumsal finans, yönetici irrasyonalitesi üzerine
odaklanarak, araştırmacılar için yeni ve önemli bir alana işaret etmektedir. Davranışsal kurumsal finans,
kurumsal finansal kararları, geleneksel yaklaşımları göz ardı etmeden, davranışsal önyargılar üzerinden
incelemektedir. Yönetici önyargıları kapsamında literatürde ağırlıklı olarak aşırı güven davranışı incelenmiş
olmakla birlikte; sürü davranışı, kayıptan kaçınma ve çıpalama önyargıları da analizlere dahil edilmiştir.
Araştırmalarda bu önyargıların sermaye yapısı kararları, kar payı dağıtımı, yatırım kararları ve nakit tutma
politikaları üzerindeki etkileri açıklanmaya çalışılmıştır. Bir literatür değerlendirmesi olan bu çalışmanın
amacı, kurumsal finansal kararlara ilişkin davranışsal önyargılar ekseninde yapılan çalışmaların sonuçlarını
ortaya koyarak, gelecekte finans alanında önemli bir eksikliği gidereceği düşünülen bu konudaki
araştırmaların önemine dikkat çekmektir.

Keywords

Davranışsal kurumsal finans, kurumsal finansal kararlar, yönetimsel irrasyonalite, bilişsel önyargılar

References

• Adhikari, Binay Kumar (2013). Peer Influence on Dividend Policies, Presented at the 2013 FMA Meetings, Working Paper (11.01.2014).
• Allen, Franklin ve Michaely, Roni (2002). Payout Policy, Working Paper, http://finance.wharton.upenn.edu/~allenf/download/Vita/payoutpolicy.pdf (15.12.2015).
• Azouzi, Mohamed Ali ve Jarboui, Anis (2012a). CEO Emotional Bias and Dividend Policy: Bayesian Network Method, Business and Economic Horizons, 7 (1), 1-18.
• Azouzi, Mohamed Ali ve Jarboui, Anis (2012b). CEO Emotional Bias and Capital Structure Choice: Bayesian Network Method, Business Excellence and Management, 2 (2), 47-70.
• Azouzi, Mohamed Ali ve Jarboui, Anis (2012c). CEO Emotional Bias and Investment Decision: Bayesian Network Method, Management Science Letters, 2, 1259-1278.
• Baddeley, Michelle (2010). Herding, Social Influence and Economic Decision Making: Socio Psychological and Neuroscientific Analyses, Philosophical Transactions of The Royal Society B, 365, 281-290.
• Baker, M., Ruback, Richard ve Wurgler, Jeffrey (2007). Behavioral Corporate Finance: A survey, Espen Eckbo (Ed.), In The Handbook of Corporate Finance: Empirical Corporate Finance, New York: Elsevier/North Holland.
• Baker, M. Pan, Xin ve Wurgler, Jeffrey (2012). The Effect of Reference Point Prices on Mergers and Acquisitions, Journal of Financial Economics, 106, 49-71.
• Baker, M. ve Wurgler, J. (2012). Behavioral Corporate Finance: A Current Survey, George M. Constantinides, Milton Harris, and Rene M. Stulz (Ed.), In Handbook of the Economics of Finance, 2, New York, NY: Elsevier.
• Banerjee, A. V. (1992). A Simple Model of Herd Behaviour, Q. J. Econ., 107, 797–817.
• Barberis, N. ve Huang, M. (2001). Mental Accounting, Loss Aversion and Individual Stock Returns, Journal of Finance, 56, 1247–1292.
• Barberis, Nicholas ve Thaler, Richard (2003). A Survey Of Behavioral Finance, Handbook of the Economics of Finance, G.M. Constantinides (Ed.), M. Harris and R. Stulz, 3 Elsevier Science B.V.
• Barros, L. A. B. ve Silveira, A. D. M. (2007). Overconfidence, Managerial Optimism and the Determinants of Capital Structure, Working Paper, 1-33. http://ssrn.com/ abstract=953273, (17.04.2016).
• Ben-David, I., Harvey, Campbell ve Graham, John (2007). Managerial Overconfidence and Corporate Policies, NBER Working Paper, No.13711.
• Chen, Shouming, Zheng Hongliang ve Wu, Sibin (2011). Senior Manager Overconfidence, Managerial Discretion and Dividend Policy: a Study of Chinese Listed Companies, African Journal of Business Management, 5 (32), 12641-12652.
• Chen, Yi-Wen ve Chang, Yuanchen (2013). Peer Effects on Corporate Cash Holdings, http://www.sfm.url.tw/20thSFM/pdf/CompletePaper/028-670909802.pdf (01.05.2016).
• Chen, Shenglan ve Ma, Hui (2017). Peer Effects in Decision-Making: Evidence From Corporate Investment, Journal of Accounting Research, http://dx.doi.org/ 10.1016/j.cjar.2016.11.002(16.01.2017).
• Conlisk, J. (1996). Why Bounded Rationality, Journal of Economic Literature, 36, 669-700.
• Cyert, Richard ve March, J. (1993). A Behavioral Theory of The Firm, Prentice Hall, Englewood Cliffs, NJ.
• Cyert, Richard, Kang, Sok-Hyon ve Kuma, Praveen (1996). Managerial Objectives and Firm Dividend Policy: A Behavioral Theory and Empirical Evidence, Journal of Economic Behavior & Organization, 31, 157-174.
• Deeptee, R. P. ve Roshan, B. (2009). Signalling Power of Dividend on Firms' Future Profits: A Literature Review, Evergreen Energy International Interdisciplinary Journal, 2 (1), 19.
• Deshmukh, Sanjay ve Goel, Anand (2013). CEO Overconfidence and Dividend Policy, Journal of Financial Intermediation, 22, 440-463.
• Deshmukh, Sanjay, Goel, Anand M. ve Howe, Keith M. (2015). Do CEO Beliefs Affect Corporate Cash Holdings?, Working Paper, DePaul University and Navigant Consulting.
• Duong, Hong Kim, Ngo, Anh Duc ve McGowan, Carl B. (2015). Industry Peer Effect and The Maturity Structure of Corporate Debt, Managerial Finance, 41 (7), 714 – 733.
• Ercan, M. Kamil ve Ban, Ünsal (2010). Finansal Yönetim, Gazi Kitabevi.
• Fairchild, R. (2005a). Behavioral Finance in A Principal-agent Model of Capital Budgeting, ICFAI Journal of Behavioral Finance, 2 (1), 34-44.
• Fairchild, R. (2005b). The Effect of Managerial Overconfidence, Asymmetric Information, and Moral Hazard on Capital Structure Decisions, The ICFAI Journal of Behavioral Finance, 2 (4).
• Fairchild, R. (2007). Behavioural Corporate Finance: Existing Research and Future Directions, http://ssrn.com/abstract=1011976 (15.02.2016).
• Fairchild, R. (2009). From Behavioral to Emotional Corporate Finance: A New Research Direction, http://ssrn.com/abstract=1473742 (15.02.2016).
• Fama, French (1970), Efficient Capital Markets: A Review of Theory and Empirical Work, Journal of Finance, 25 (2), 383-417.
• Foucault, T. ve Fresard, L. (2014). Learning from Peers’ Stock Prices and Corporate Investment, Journal of Finance Economics, 111 (3), 187-243.
• Galasso, Alberto ve Simcoe, Timothy S. (2010). CEO Overconfidence and Innovation, NBER Working Paper: 16041.
• Gervais S. Heaton, J. B. ve Odean, Terrance (2011). Overconfidence, Compensation Contracts and Capital Budgeting, The Journal of Finance, LXVI (5), 1735-1777.
• Gordon, Myron J. (1959). Dividends, Earnings, and Stock Prices, Review of Economics and Statistics, 41, 99-105.
• Hackbarth, D. (2002). Managerial Optimism, Overconfidence, and Capital Structure Decisions, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=362740 (15.12.2015).
• Hackbarth, D. (2008). Managerial Traits and Capital Structure Decisions, Journal of Financial and Quantitative Analysis, 43 (04), 843-881.
• Hackbarth, D. (2009). Determinants of Corporate Borrowing: A Behavioral Perspective, Journal of Corporate Finance, 15 (4), 389-411.
• Heaton, J. B. (2002). Managerial Optimism and Corporate Finance, Financial Management, 31 (2), 33-45.
• Helliar, C.V. Power, D.M. ve Sinclair, C.D. (2005). Managerial Irrationality in Financial Decision Making, Managerial Finance, 31 (4), 1-11.
• Huang-Meier, Winifred, Lambertides, N. ve Steeley, J.M. (2015). Motives for Corporate Cash Holdings: The CEO Optimism Effect, Review of Quantitative Finance and Accounting, 1-34.
• Hribar, Paul ve Yang, Holly (2015). CEO Overconfidence and Management Forecasting, Contemporary Accounting Research, Singapore Management University School of Accountancy Research Paper, 34, SSRN: http://ssrn.com/abstract =929731 (05.05.2016).
• Hung, Chi-Hsiou D., Naeem, Shammyla ve Wei, K.C. John (2016). Credit Rating Changes of Peer Firms and Corporate Capital Structure, http://www.efmaefm.org/0EFMAMEETINGS/ FMA%20ANNUAL%20MEETINGS/2016-Switzerland/papers/EFMA2016_0401 _ fullpaper.pdf (04.01.2016).
• Im, Hyun Joong ve Kang, Ya (2015). Peer Effects in Capital Structure Adjustments, 28th Australasian Finance and Banking Conference, http://ssrn.com/abstract=2638568 (31.07.2015).
• Jensen, Michael (1986). Agency Cost of Free Cash Flow, Corporate Finance and Takeovers, American Economic Review, 76, 323-329.
• Joo, Changlim Yang, Insun ve Yang, Taeyong (2016). Peer Group Effect in Firm Cash Holding Policy: Evidence from Korean Manufacturing Firms, Asia-Pacific Journal of Financial Studies, 45, 535–573
• Kahneman, D. ve Tversky, A. (1979). Prospect theory: An Analysis of Decision Under Risk, Econometrica, 47, 263–91.
• Karaa, İbrahim Emre (2011). Impact of Anchoring Bias on Corporate Profits and Shareholders Wealth, International Journal of Economics and Finance Studies, 3 (2) 105-115.
• Karan, Mehmet Baha (2004). Yatırım Analizi ve Portföy Yönetimi, Gazi Kitabevi.
• Keynes, J. M. (1930). In A Treatise on Money, London, UK: Macmillan.
• Leary, Mark T. ve Roberts, Michael R. (2014). Do Peer Firms Affect Corporate Financial Policy?, Journal of Finance, 69, 139-178.
• Lieberman, Marvin B. ve Asaba, Shigeru (2006). Why Do Firms Imitate Each Other?, The Academy of Management Review, 31 (2), 366-385.
• Lin, Y., Hu, Shing-yang Hu ve Chen, Ming-shen (2005). Managerial Optimism and Corporate Investment: Some Empirical Evidence from Taiwan, Pacific-Basin Finance Journal, 13 (5), 523-546.
• Lintner, John (1956). Distribution of Incomes of Corporations Among Dividends, Retained Earnings and Taxes, American Economic Review, 46, 97113.
• Malmendier, U. ve Tate, G. (2005). CEO Overconfidence and Corporate Investment, Journal of Finance, 60 (6), 2661-2700.
• Malmendier, U. Tate, Geoffrey ve Yan, Jon (2011). Overconfidence and Early-life Experiences: The Effect of Managerial Traits on Corporate Financial Policies, Journal of Finance, 66 (5), 1687-1733.
• Markowitz, Harry (1952). Portfolio Selection, The Journal of Finance, 7 (1), 77-91.
• Mishra, Chandra S. ve Daniel L. McConaughy (2016). Founding Family Control and Capital Structure: The Risk of Loss of Control and the Aversion to Debt, Entrepreneurship: Theory and Practice, Summer 1999, 53, Academic OneFile.
• Miller, Merton H. ve Modigliani, Franco (1961). Dividend Policy, Growth, and the Valuation of Shares, The Journal of Business, 34 (4), 411-433.
• Myers, Stewart C. (2002). Financing of Corporations, Handbook of The Economics of Finance, http://epge.fgv.br/we/MD/FinancasCorporativas/2006?action=AttachFile &do=get&target=myers02.pdf (15.05.2016).
• Nissim, David (2013). Dividends as Reference Points: Evidence from EU15 Countries, http://urn.fi/URN:NBN:fi:aalto-201305102110 (15.04.2016).
• Odean, T. (1998). Volume, Volatility, Price and Profit When All Traders are Above Average, Journal of Finance, 53 (6), 1887 -1934.
• Oliver, B. R. (2005). The Impact of Management Confidence on Capital Structure, http://ssrn.com/abstract=791924 (02.01.2016).
• Oran, Jale Sözer ve Perek, Seda Gürol (2013). An Empirical Test of Optimism Bias in Capital Budgeting Decisions, Journal of Modern Accounting and Auditing, 9 (2), 287-296.
• Nofsinger, J. (2003). Social Mood and Financial Economics, Working Paper, Department of Finance: Washington State University.
• Patnam, Manasa (2011). Corporate Networks and Peer Effects in Firm Policies: Evidence From India, http://www.econ.cam.ac.uk/events/conf/networks-docs/corporate_ mpatnam.pdf (15.12.2015).
• Pompian, Michael M. (2006). Behavioral Finance and Wealth Manegement: How to Build Optimal Portfolios That Account for Investor Biases, John Wiley and Sons, New Jersey.
• Ramiah, Vikash ve Yilang Zhao, Moosa, Imad ve Graham, Michael (2014). A Behavioral Finance Approach to Working Capital Management, The European Journal of Finance, 10.1080/1351847x.2014. 883549 (02.01.2016).
• Ricciardi, Victor ve Simon Helen K. (2000). What is Behavirol Finance?, Business, Education & Technology Journal, 2 (1), 1-9.
• Roll, Richard (1986). The Hubris Hypothesis of Corporate Takeovers, Journal of Business, 59 (2), 197-216.
• Shefrin, Hersh (2001). Behavioral Corporate Finance, Journal of Applied Corporate Finance, 14 (3), 113-126.
• Shefrin, Hersh (2007). Behavioral Corporate Finance: Decisions that Create Value, McGraw-Hill International Edition.
• Shiller, Robert J. (2003). From Efficient Markets Theory to Behavioral Finance, Journal of Economic Perspectives, 17 (1), 83-104.
• Soufani, K., Tse, Terence, Cole, Othman ve Aboulame, Anas (2012). Do Behavioural Biases Explain Capital Structure Decisions?, European Financial Management Association 2012 Annual Meetings, June 27-30, Barcelona, Spain
• Statman, Meir (2014). Behavioral Finance: Finance with Normal People, Borsa İstanbul Review, 14 (2), 65-73.
• Thaler, R. H. (1999). Mental Accounting Matters, Journal of Behavioral Decision Making, 12, 183-206.
• Tomak, Serpil (2013). The Impact of Overconfidence on Capital Structure in Turkey, International Journal of Economics and Financial Issues, 3 (2), 512-518.
• Tversky, A. ve Kahneman, D. (1974). Judgment Under Uncertainty: Heuristics and Biases, Science, 185, 1124-1131.
• Tversky, A. ve Kahneman, D. (1991). Loss Aversion in Riskless Choice: A Reference Dependent Model, Quarterly Journal of Economics, 106 (4), 1039–1061.
• Von Neumann, John ve Morgenstern Oskar (1944). Theory Of Games And Economic Behavior, 2. Baskı, Princeton, NJ: Princeton University Press.
• Xu, Bin (2014). Corporate Financing Decisions: The Role of Managerial Overconfidence, (Yayınlanmamış Doktora Tezi), Loughborough Üniversitesi.
• Zeckhauser, Richard Patel, Jayendu ve Hendricks, Darryll (1991). Nonrational Actors and Financial Market Behavior, Theory and Decision, 31, 257-287.