Yıl 2018, Cilt 3 , Sayı 2, Sayfalar 115 - 132 2018-12-28


Abdu Seid ALİ [1] , Jale S.ORAN [2]

This paper aims to assess whether there is a behavioral bias of Turkish FDI investors in Ethiopia. Besides, it addresses the influence of firm size, investment duration, target customers and amount of investment on the behavioral variables. In order to do so, a survey was conducted on a sample of Turkish FDI investors in Ethiopia which tries to examine their cognitive psychological factors towards their investment decisions. The survey result was analyzed using factor analysis. The statistical findings confirm that some psychological anomalies such as representativeness, herding, regret aversion and mental accounting have been observed on Turkish FDI investors. The regression analysis shows that amount of investment of the firms significantly and positively affects herding, representativeness, regret aversion and mental accounting behaviors. Furthermore, duration of investment in Ethiopia affects their representativeness and mental accounting behavioral biases of investors positively.

FDI, Behavioral bias, Turkish investors, Ethiopia
  • Ackert, L., & Deaves, R. (2010). Behavioral Finance Psychology, Decision-Making, and Markets (1 ed.). Mason:South-Western Cengage Learning.
  • Aharoni, Y. (2011). Behavioral elements in foreign direct investments. Research in Global Strategic Management,15(15), 23-60.
  • Alves, R. P. (2008). Behavioural Determinants of Foreign Direct Investment. Lisbon: Gabinete de Estratégia e Estudos, Ministério da Economia.
  • Amanuel, M. (2015). Factors affecting FDI flow in Ethiopia: An empirical investigation. International Journal of Current Research, 7(2), 12608-12614.
  • Araujo, S. (2009). Imitative behaviour and FDI location choice: An empirical assessment. IFN Seminar. Stockholm: Research Institute of Industrial Economics.
  • Atlaw, D., Teklemariam, D., & Dong-Geun, H. (2014). Determinants of foreign direct investment: Reflections from Ethiopia. Social and Basic Sciences Research Review, 2(2), 85-95.
  • Baker, K., & Nofsinger, J. (2010). Behavioral Finance: An Overview. In K. Baker, & J. Nofsinger (Eds.), Behavioral Finance: Investors, Corporations, and Markets (pp. 03-22). New Jersey: John Wiley & Sons, Inc.
  • Barberis, N., & Thaler, R. (2003). A survey of behavioral finance. In G. Constantinides, M. Harris, & R. Stulz (Eds.), Handbook of the Economics of Finance (pp. 1051-1121). North Holland: Elsevier Science B.V. .
  • Beckmann, D., Menkhoff, L., & Megumi, S. (2008). Does culture affect asset managers’ views and behavior? Journal of Economic Behavior & Organization, 67(3-4), 624-643.
  • Blunch, N. J. (2008). Introduction to structural equation modelling using SPSS and AMOS. . Thousand Oaks CA: Sage Publications LtD.
  • Burton, E., & Shah, S. (2013). Behavioral finance: Understanding the social, cognitive, and economic debates. New Jersey: John Wiley & Sons, inc.
  • Child, D. (2006). The essentials of factor analysis (3rd ed.). New York: Continuum International Publishing Group.
  • Eiteman, D., Stonehill, A., & Moffett, M. (2013). Multinational business finance (13 ed.). New Jersey: Pearson Education, Inc.
  • Fama, E. (1998). Market Efficiency, Long-term returns, and behavioral finance. Journal of Financial Economics, 49(3), 283 –306.
  • Getinet, H., & Hirut, A. (2006). Determinants of foreign direct investment in Ethiopia: A time series analysis. The 4th International Conference on the Ethiopian Economy. Addis Ababa.
  • Gilovich, T. (1991). How we know what isn’t so: The fallibility of human reason in everyday. New York: The Free Press.
  • Grinblatt, M., & Keloharju, M. (2001). What makes investors trade? The Journal of Finance, 56(2), 589–616.
  • Hosseini, H. (2005). An economic theory of FDI: A behavioral economics and historical approach. The Journal of Socio-Economics, 34, 528-541.
  • Hutzschenreuter, T., & et.al. (2014). Corporate strategic responses to foreign entry: Insights from prospect theory. The Mulitnational Business Review, 22(3), 294-323.
  • Knickerbocker, F. (1973). Oligopolistic reaction and multinational enterprise. Cambridge: Harvard University.
  • Kuo, C.-L., & Fang, W.-C. (2009). Psychic Distance and FDI Location Choice:Empirical Examination of Taiwanese Firms in China. Asia Pacific Management Review, 14(1), 85-106.
  • Levis.M, Muradoglu, G., & Vasileva, K. (2010). Herding in FDI outlows. International Conference on Computational and Financial Econometrics. London: Senate House.
  • McMillan, J. H., & Schumacher, S. (2001). Research in education: A conceptual introduction. New York: Logman. Peterson, R. (2010). Neuroeconomics and Neurofinance. In K. Baker, & J. Nofsinger, Behavioral finance : investors, corporations, and markets (pp. 73-94). New Jersey: John Wiley & Sons, Inc.
  • Ritter, J. (2003). Behavioral finance. Pacific-Basin Finance Journal, 11(4), 429-437.
  • Rosenboima, M., Luskib, I., & Shavit, T. (2008). Behavioral Approaches to Optimal FDI Incentives. Managerial and Decision Economics, 29, 601-607.
  • Scharfstein, D., & Stein, J. (1990). Herd Behavior and investment. The American Economic Review, 80(3), 465-479.
  • Schwartz, H. (2010). Heuristics or Rules of Thumb. In H. K. Baker, Behavioral Finance − Investors,Corporations, and Markets (pp. 57-72). Hoboken, NJ: John Wiley & Sons, Inc.
  • Shefrin, H., & Statman, M. (1985). The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence. Journal of Finance,, 40(3), 777-790.
  • Shiller, R. (2003). From efficient markets theory to behavioral finance. Journal of Economic Perspectives, 17(1), 83-104.
  • Shleifer, A., & Summers, L. (1990). The noise trader approach to finance. Journal of Economic Perspectives, 4, 19-33.
  • Statman, M. (2008). Countries and culture in behavioral finance. In CFA Institute Conference Proceedings Quarterly, 25(3), 38-44
  • Tavakol, M., & Dennick, R. (2011). Making sense of Cronbach’s alpha. International Journal of Medical Education, 2, 53-55.
  • Thaler, R. (1985). Mental accounting and consumer choice. Marketing Science, 4(3), 199-214.
  • Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 85, 1124-1131.
  • Vasileva, K. (2011). Foreign direct investment – a behavioural finance approach. Retrieved June 13, 2017, from City University: http://openaccess.city.ac.uk/1185/
Birincil Dil en
Konular İşletme
Bölüm Makaleler

Orcid: 0000-0001-5783-3546
Yazar: Abdu Seid ALİ (Sorumlu Yazar)
Kurum: Wolaita Sodo University, Faculty of Business and Economics
Ülke: Turkey

Yazar: Jale S.ORAN
Ülke: Turkey


Başvuru Tarihi : 12 Kasım 2018
Kabul Tarihi : 31 Aralık 2018
Yayımlanma Tarihi : 28 Aralık 2018

APA Ali, A , S.oran, J . (2018). THE IMPACT OF PSYCHOLOGICAL BIASES ON FOREIGN DIRECT INVESTMENT (FDI): THE CASE OF TURKISH INVESTORS IN ETHIOPIA . Journal of Research in Business , 3 (2) , 115-132 . DOI: 10.23892/JRB.2019.25