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The Relevance Of Psychology Theories To Financial Accounting

Listed author(s):
  • Victoria Bogdan

    (Professor of Accounting at the University of Oradea)

  • Ioana Teodora Mester

    (Assistant Professor of Statistics at the University of Oradea)

  • Dorina Nicoleta Popa

    (Assistant Professor of Financial statements analysis at the University of Oradea)

  • Diana Elisabeta Balaciu

    (Assistant Lecturer of Accounting at the University of Oradea)

Starting from the interest that we have found in psychology sciences in order to understand better the way managers, analysts and last but not least investors behave in the decision making process our study focuses on the link between financial reporting, disclosure policies and investors judgment under uncertainty. The theoretical background describes the rational judgment of investors found in economic utility theories but also looks upon the main cognitive and social psychology for irrational behavior in the decision making process. Our research mainly focuses on measuring the influence of five psychological factors on the irrational behavior of potential investor. We showed that overconfidence occurs when investors overestimate the precision of their private signals and their knowledge about the value of a financial transaction and always remember the successfully times and easily forget the failures. Also, we have pointed out that limited attention is frequently associated with changing in disclosure policies and selfcontrol is negatively related to irrational behavior of investor.

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Article provided by Romanian-American University in its journal Romanian Economic and Business Review.

Volume (Year): 4 (2009)
Issue (Month): 4 (Winter)
Pages: 111-124

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Handle: RePEc:rau:journl:v:4:y:2009:i:4:p:111-124
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