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CEO emotional bias and dividend policy: Bayesian network method

Author

Listed:
  • Azouzi Mohamed Ali

    (Higher Institute of Business Administration (ISAAS) University of SFAX, Tunisia)

  • Jarboui Anis

    (Higher Institute of Business Administration (ISAAS) University of SFAX, Tunisia)

Abstract

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. We 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 some 100 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.

Suggested Citation

  • Azouzi Mohamed Ali & Jarboui Anis, 2012. "CEO emotional bias and dividend policy: Bayesian network method," Business and Economic Horizons (BEH), Prague Development Center, vol. 7(1), pages 1-18, June.
    • Handle: RePEc:pdc:jrnbeh:v:7:y:2012:i:1:p:1-18
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    Cited by:

    1. Ferdaws Ezzi & Mohamed Ali Azouzi & Anis Jarboui, 2015. "Environmental performance indicators of Tunisian companies: Analysis via the decision tree," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 5(8), pages 114-127, August.
    2. Mohamed Ali Azouzi & Anis Jarboui, 2018. "Managerial Optimism Level and Investment Decision: Decision Tree Analysis," International Journal of Social Science Studies, Redfame publishing, vol. 6(1), pages 107-123, January.
    3. Hamza Fadhila & Azouzi Mohamed Ali & Jarboui Anis, 2014. "CEO's commitment bias, ownership concentration, and innovation decision: Behavioral management of CEO's discretion," Cogent Economics & Finance, Taylor & Francis Journals, vol. 2(1), pages 1-24, December.

    More about this item

    Keywords

    Emotional bias; corporate finance; optimism; overconfidence; loss aversion; dividend policy; Bayesian network.;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • G3 - Financial Economics - - Corporate Finance and Governance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

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