International Journal of Behavioural Accounting and Finance http://www.inderscience.com/browse/index.php?journalID=237&year=2011&vol=2&issue=3/4 Inderscience Publishers Ltd en-uk International Journal of Behavioural Accounting and Finance 1753-1969 1753-1977 © 2011 Inderscience Publishers Ltd editor@inderscience.com https://www.inderscience.com/images/files/coverImgs/ijbaf_scoverijbaf.jpg http://www.inderscience.com/browse/index.php?journalID=237&year=2011&vol=2&issue=3/4 http://www.inderscience.com/link.php?id=45012 Individual characteristics are important in explaining investor trading behaviour. The clients of a small cooperative bank are analysed over the three-year period 2005-2007 to measure the effect that age, gender, income, job position and status of online trader has on the number of stock trades completed. A negative binomial regression is used since our dependent variable, the number of trades, can only assume non-negative discrete values. This paper shows that the number of transactions increases if the client is: man vs. women; self-employed vs. employee, retiree or housewife; online vs. traditional trader; higher vs. low income. Our findings are not clear cut with respect to age. In conclusion, individual characteristics are important in explaining an individual's trading behaviour since they affect an investor's attitude towards risk and overconfidence. Individual investor behaviour: evidence from the clients of a small credit cooperative bank
Enrico Maria Cervellati; Pino Fattori; Pierpaolo Pattitoni
International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 191 - 207
Individual characteristics are important in explaining investor trading behaviour. The clients of a small cooperative bank are analysed over the three-year period 2005-2007 to measure the effect that age, gender, income, job position and status of online trader has on the number of stock trades completed. A negative binomial regression is used since our dependent variable, the number of trades, can only assume non-negative discrete values. This paper shows that the number of transactions increases if the client is: man vs. women; self-employed vs. employee, retiree or housewife; online vs. traditional trader; higher vs. low income. Our findings are not clear cut with respect to age. In conclusion, individual characteristics are important in explaining an individual's trading behaviour since they affect an investor's attitude towards risk and overconfidence.

]]> 10.1504/IJBAF.2011.045012 International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 191 - 207 Enrico Maria Cervellati; Pino Fattori; Pierpaolo Pattitoni Department of Management, University of Bologna, Via Capo di Lucca, 34 – 40126 Bologna, Italy; Luiss Guido Carli, Rome, Italy. ' Banca di Credito Cooperativo Gatteo, Via della Cooperazione, 10 – 47043, Gatteo, Italy. ' Department of Management, University of Bologna, Via Capo di Lucca, 34 – 40126, Bologna, Italy; The Rimini Centre for Economic Analysis (RCEA), Rimini, Italy behavioural finance overconfidence overtrading individual investors investor characteristics credit cooperative banks investor behaviour age gender income job position status online traders risk. 2012-01-20T23:20:50-05:00 2 3/4 191 207 2012-01-20T23:20:50-05:00 http://www.inderscience.com/link.php?id=45013 A number of different factors affect stock market development in emerging markets. This paper addresses the role of culture and religion in the development of the Libyan stock market. In particular we examine the role of trust in the efficient operation of an emerging market and the importance of culture, religion and other variables in enhancing trust between market agents. The findings of this study are that both culture and religion have an important role in Libyan stock market development. Both culture and religion are dimensions that may lead to the enhancement of trust, which itself then may lead to successful financial market development in Libya. Religion and cultural dimensions of trust in the emerging financial market in Libya
Zainab Abdussalam; Bob Ryan
International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 208 - 224
A number of different factors affect stock market development in emerging markets. This paper addresses the role of culture and religion in the development of the Libyan stock market. In particular we examine the role of trust in the efficient operation of an emerging market and the importance of culture, religion and other variables in enhancing trust between market agents. The findings of this study are that both culture and religion have an important role in Libyan stock market development. Both culture and religion are dimensions that may lead to the enhancement of trust, which itself then may lead to successful financial market development in Libya.

]]> 10.1504/IJBAF.2011.045013 International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 208 - 224 Zainab Abdussalam; Bob Ryan Business School, University of Gloucestershire, The Park, Cheltenham GL50 2RH, UK. ' Business School, University of Gloucestershire, The Park, Cheltenham GL50 2QF, UK religion culture trust stock markets Libya emerging markets financial markets market development. 2012-01-20T23:20:50-05:00 2 3/4 208 224 2012-01-20T23:20:50-05:00 http://www.inderscience.com/link.php?id=45014 To assess if risk attitudes play a role in individual investors' reactions to adverse events in financial markets, members of a university community (N = 102) were administered a risk tolerance instrument. Additional survey items asked about financial, emotional and behavioural effects of the market downturn that began in Fall 2008. Attitudes towards risk and towards uncertainty, and investor experience, were positively correlated with riskiness of the individuals' self-reported investment portfolio. Causal modelling confirmed that investment risk tolerance predicts actual risk in the investor's portfolio; which predicted losses in portfolio value during the recent market disruptions. Portfolio losses correlated with negative emotional reactions, which together with risk tolerance predicted self-reported changes in investment strategy. In sum, investors' emotional reactions to losses may be mitigated by higher levels of risk tolerance, yet higher levels of risk tolerance are associated with riskier portfolios, and thus to larger losses in a market downturn. Does investment risk tolerance predict emotional and behavioural reactions to market turmoil?
James E. Corter
International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 225 - 237
To assess if risk attitudes play a role in individual investors' reactions to adverse events in financial markets, members of a university community (N = 102) were administered a risk tolerance instrument. Additional survey items asked about financial, emotional and behavioural effects of the market downturn that began in Fall 2008. Attitudes towards risk and towards uncertainty, and investor experience, were positively correlated with riskiness of the individuals' self-reported investment portfolio. Causal modelling confirmed that investment risk tolerance predicts actual risk in the investor's portfolio; which predicted losses in portfolio value during the recent market disruptions. Portfolio losses correlated with negative emotional reactions, which together with risk tolerance predicted self-reported changes in investment strategy. In sum, investors' emotional reactions to losses may be mitigated by higher levels of risk tolerance, yet higher levels of risk tolerance are associated with riskier portfolios, and thus to larger losses in a market downturn.

]]> 10.1504/IJBAF.2011.045014 International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 225 - 237 James E. Corter Teachers College, Columbia University, Box 118, 525 W. 120th St., New York, NY 10027, USA behavioural finance investment risks risk tolerance IRT risk aversion decision making uncertainty investment experience market downturn emotional reactions emotion. 2012-01-20T23:20:50-05:00 2 3/4 225 237 2012-01-20T23:20:50-05:00 http://www.inderscience.com/link.php?id=45015 This paper investigates the impact of social and psychological factors on the quality of boardroom decision-making. It is argued that bias in the boardroom undermines the monitoring function of boards, with a particularly negative impact on the functional independence of non-executive directors. The study is informed by a two-year participant observer case study of the governance failures of a housing association that experienced significant adverse performance resulting in its near collapse. The case study adds insights to the theoretical discussion by highlighting the pervasive nature of bias in boardroom proceedings. The paper closes by exploring means to minimise the impact of bias. Bias in the boardroom
Oliver Marnet
International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 238 - 251
This paper investigates the impact of social and psychological factors on the quality of boardroom decision-making. It is argued that bias in the boardroom undermines the monitoring function of boards, with a particularly negative impact on the functional independence of non-executive directors. The study is informed by a two-year participant observer case study of the governance failures of a housing association that experienced significant adverse performance resulting in its near collapse. The case study adds insights to the theoretical discussion by highlighting the pervasive nature of bias in boardroom proceedings. The paper closes by exploring means to minimise the impact of bias.

]]> 10.1504/IJBAF.2011.045015 International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 238 - 251 Oliver Marnet University of Exeter Business School, Streatham Court, Rennes Drive, Exeter, EX4 4PU, UK behavioural accounting behavioural finance boardroom decision making non-executive independent directors bias mitigation case study social factors psychological factors monitoring functional independence corporate governance housing associations. 2012-01-20T23:20:50-05:00 2 3/4 238 251 2012-01-20T23:20:50-05:00 http://www.inderscience.com/link.php?id=45022 It is the position of this paper that recent financial crises have been amplified, if not created, by the sin of professional financial untrustworthiness. Trust is the bedrock of financial behaviour and without trust, financial markets fail as efficient resource allocators. Sin is identified as ethical failure on a communitywide scale. Between 1985 and 2010, the USA has experienced five major financial crises that have explicitly cost the taxpayer more than all wars since Vietnam. This paper identifies the emphasis on transactions fees as the operational vehicle behind these crises and discusses a few potential remedies. The sin of untrustworthy financial behaviour: the American experience, 1985-2010
Robert A. Olsen
International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 252 - 258
It is the position of this paper that recent financial crises have been amplified, if not created, by the sin of professional financial untrustworthiness. Trust is the bedrock of financial behaviour and without trust, financial markets fail as efficient resource allocators. Sin is identified as ethical failure on a communitywide scale. Between 1985 and 2010, the USA has experienced five major financial crises that have explicitly cost the taxpayer more than all wars since Vietnam. This paper identifies the emphasis on transactions fees as the operational vehicle behind these crises and discusses a few potential remedies.

]]> 10.1504/IJBAF.2011.045022 International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 252 - 258 Robert A. Olsen Decision Research, 1201 Oak Street, Eugene, Oregon 97405, USA financial behaviour trust behavioural finance market efficiency untrustworthy behaviour USA United States financial crises ethical failure ethics transactions fees. 2012-01-20T23:20:50-05:00 2 3/4 252 258 2012-01-20T23:20:50-05:00 http://www.inderscience.com/link.php?id=45016 Fear of private equity (PE) firms 'putting lipstick on the pig' when divesting investee companies is common in the IPO investor market. PE firms wishing to maximise their exit value showcase investee companies in the best possible light. While PE firms are thought to add considerable value to investee companies, substantial concerns have been voiced over cash stripping, accounting manipulation and short-term cost cutting to maximise reported profits. This study used a judgement experiment and qualitative interviews with buy-side financial analysts to investigate how the characteristics of the PE firm and its involvement with the investee company influence IPO investors' decision making. The research confirms buy-side analyst concerns over window dressing to be real and exacerbated by evidence of intense PE firm involvement over short durations of time. Concerns can be mitigated, however, by positive signals of future prospects, notably the degree of retained ownership and perceived PE firm quality. What influences investors' perceptions of private equity firm window dressing at IPO?
Donald Ross; Mike Hopkins
International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 259 - 272
Fear of private equity (PE) firms 'putting lipstick on the pig' when divesting investee companies is common in the IPO investor market. PE firms wishing to maximise their exit value showcase investee companies in the best possible light. While PE firms are thought to add considerable value to investee companies, substantial concerns have been voiced over cash stripping, accounting manipulation and short-term cost cutting to maximise reported profits. This study used a judgement experiment and qualitative interviews with buy-side financial analysts to investigate how the characteristics of the PE firm and its involvement with the investee company influence IPO investors' decision making. The research confirms buy-side analyst concerns over window dressing to be real and exacerbated by evidence of intense PE firm involvement over short durations of time. Concerns can be mitigated, however, by positive signals of future prospects, notably the degree of retained ownership and perceived PE firm quality.

]]> 10.1504/IJBAF.2011.045016 International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 259 - 272 Donald Ross; Mike Hopkins Faculty of Business, Australian Catholic University, 8-20 Napier Street, North Sydney, NSW 2060, Australia. ' Faculty of Business, Australian Catholic University, 8-20 Napier Street, North Sydney, NSW 2060, Australia private equity IPO certification window dressing reputations retained ownership investor perceptions initial public offering behavioural finance. 2012-01-20T23:20:50-05:00 2 3/4 259 272 2012-01-20T23:20:50-05:00 http://www.inderscience.com/link.php?id=45017 This paper reports the results of an experiment designed to provide insight into how people use financial information. Investors are faced with an ominous task when trying to aggregate information about available investment opportunities. In the experiment, participants received a set of information cues about mutual funds. For pairs of funds they were asked to choose the fund that would have the highest return in the following year. Importantly, participants had the opportunity to learn about the usefulness of the information cues provided. The results suggest that participants relied heavily on the cue with highest predictive accuracy. This behaviour is consistent with the use of a take the best heuristic, a decision tool that simplifies decision-making by using a single, predictive cue. An experimental examination of fast and frugal mutual fund picking
Lucy F. Ackert; Bryan K. Church; Paula A. Tkac
International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 273 - 288
This paper reports the results of an experiment designed to provide insight into how people use financial information. Investors are faced with an ominous task when trying to aggregate information about available investment opportunities. In the experiment, participants received a set of information cues about mutual funds. For pairs of funds they were asked to choose the fund that would have the highest return in the following year. Importantly, participants had the opportunity to learn about the usefulness of the information cues provided. The results suggest that participants relied heavily on the cue with highest predictive accuracy. This behaviour is consistent with the use of a take the best heuristic, a decision tool that simplifies decision-making by using a single, predictive cue.

]]> 10.1504/IJBAF.2011.045017 International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 273 - 288 Lucy F. Ackert; Bryan K. Church; Paula A. Tkac Department of Economics and Finance, Michael J. Coles College of Business, Kennesaw State University, 1000 Chastain Road, Kennesaw, GA 30144, USA; Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309-4470, USA. ' DuPree College of Management, Georgia Tech., Atlanta, GA 30332-0520, USA. ' Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309-4470, USA heuristics financial decisions mutual funds financial information use decision making behavioural finance information cues fund selection. 2012-01-20T23:20:50-05:00 2 3/4 273 288 2012-01-20T23:20:50-05:00 http://www.inderscience.com/link.php?id=45018 Previous research demonstrates that investors classified as overconfident tend to make more prediction errors and trade at higher volumes than rational investors in the capital market, with the outcome of suffering greater trading losses. The current experimental research is presented here with the aim of further exploring these issues. According to its methodology, participants are classified into three groups based on their score of overconfidence: moderate, more overconfident, and less overconfident investors. The results of the current study demonstrate that the more overconfident investors committed more frequent prediction errors and traded in higher volumes in all markets than the less overconfident ones; and further, that this led to losses, except when the majority of all market players suffered from overconfidence due to bad news. The patterns of prediction, trade, and transfer of wealth from overconfident investors in the capital market: a case study in an experimental setting
Mahatma Kufepaksi
International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 289 - 309
Previous research demonstrates that investors classified as overconfident tend to make more prediction errors and trade at higher volumes than rational investors in the capital market, with the outcome of suffering greater trading losses. The current experimental research is presented here with the aim of further exploring these issues. According to its methodology, participants are classified into three groups based on their score of overconfidence: moderate, more overconfident, and less overconfident investors. The results of the current study demonstrate that the more overconfident investors committed more frequent prediction errors and traded in higher volumes in all markets than the less overconfident ones; and further, that this led to losses, except when the majority of all market players suffered from overconfidence due to bad news.

]]> 10.1504/IJBAF.2011.045018 International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 289 - 309 Mahatma Kufepaksi University of Lampung, Jl. Sumantri Brojonegoro 1, Gedung Meneng, Bandar Lampung, Indonesia overconfidence self-deception excessive trading profit and loss trading losses overconfident investors prediction errors trading volumes. 2012-01-20T23:20:50-05:00 2 3/4 289 309 2012-01-20T23:20:50-05:00 http://www.inderscience.com/link.php?id=45019 Many behavioural studies employ surveys that rely on a Likert scale for construct measurement. However, prior research has shown that using Likert scales can be problematic. One alternative to Likert scale construction is the 'fast form' approach which uses the semantic differential scale and has been shown to alleviate some – but not all – of the Likert scale biases. Our contribution to this methodological discussion is three-fold: First, we confirm the psychometric equivalency of fast form and Likert scales using a complex technology acceptance model in the context of tax software acceptance. Second, we compare the results of two subject groups with distinct expertise and show that cross-method differences are not significant, while cross-group differences are significant. Finally, we evaluate the efficiency of the fast form approach by comparing completion time and missing values for each approach. Our results suggest shorter survey completion times with the fast form approach. Revisiting the Likert scale: can the fast form approach improve survey research?
Alexander McLeod; Sonja Pippin; Jeffrey A. Wong
International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 310 - 327
Many behavioural studies employ surveys that rely on a Likert scale for construct measurement. However, prior research has shown that using Likert scales can be problematic. One alternative to Likert scale construction is the 'fast form' approach which uses the semantic differential scale and has been shown to alleviate some – but not all – of the Likert scale biases. Our contribution to this methodological discussion is three-fold: First, we confirm the psychometric equivalency of fast form and Likert scales using a complex technology acceptance model in the context of tax software acceptance. Second, we compare the results of two subject groups with distinct expertise and show that cross-method differences are not significant, while cross-group differences are significant. Finally, we evaluate the efficiency of the fast form approach by comparing completion time and missing values for each approach. Our results suggest shorter survey completion times with the fast form approach.

]]> 10.1504/IJBAF.2011.045019 International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 310 - 327 Alexander McLeod; Sonja Pippin; Jeffrey A. Wong University of Nevada, 1604 N. Virginia St., Reno, Nevada 89557, USA. ' University of Nevada, 1604 N. Virginia St., Reno, Nevada 89557, USA. ' University of Nevada, 1604 N. Virginia St., Reno, Nevada 89557, USA Likert scale semantic differential unified theory of acceptance and use of technology UTAUT fast form behavioural accounting survey research technology acceptance model. 2012-01-20T23:20:50-05:00 2 3/4 310 327 2012-01-20T23:20:50-05:00 http://www.inderscience.com/link.php?id=45020 The paper seeks to extend the findings of Gill and Biger (2009) related to gender differences and factors that affect stock investment decision of Western Canadian investors by examining the affects of: 1) investors' investment expertise; 2) investors' knowledge of 'neutral information'; 3) investors' consultation with investment advisors on their decisions to invest in mutual funds. The present study is based on a sample of people living in Punjab and Delhi areas of India. Subjects were asked about their beliefs and feelings in relations to their investment decisions with particular reference to investments in mutual funds. We found that the degree of mutual fund investment decision is related to the degree of Indian investors' perceptions about their: 1) investment expertise; 2) general knowledge about the economy and the concept of mutual funds; 3) consultation with investment advisors. Family size also plays some role in the decision to invest in mutual funds. The valuable and useful recommendations for the investment managers and investment advisors have also been provided in the paper. Factors that affect mutual fund investment decision of Indian investors
Amarjit Gill; Nahum Biger; Harvinder S. Mand; Sukhinder S. Gill
International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 328 - 345
The paper seeks to extend the findings of Gill and Biger (2009) related to gender differences and factors that affect stock investment decision of Western Canadian investors by examining the affects of: 1) investors' investment expertise; 2) investors' knowledge of 'neutral information'; 3) investors' consultation with investment advisors on their decisions to invest in mutual funds. The present study is based on a sample of people living in Punjab and Delhi areas of India. Subjects were asked about their beliefs and feelings in relations to their investment decisions with particular reference to investments in mutual funds. We found that the degree of mutual fund investment decision is related to the degree of Indian investors' perceptions about their: 1) investment expertise; 2) general knowledge about the economy and the concept of mutual funds; 3) consultation with investment advisors. Family size also plays some role in the decision to invest in mutual funds. The valuable and useful recommendations for the investment managers and investment advisors have also been provided in the paper.

]]> 10.1504/IJBAF.2011.045020 International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 328 - 345 Amarjit Gill; Nahum Biger; Harvinder S. Mand; Sukhinder S. Gill College of Business Administration, Trident University International, 5757 Plaza Drive, CA 90630, USA. ' School of Business, Academic Center Carmel, Shaar Palmer 4, Haifa, 33031, Israel. ' Sikh National College, Banga, Sahid Bhagat Singh Nagar, 144505, East Punjab, India. ' Global Pacific Financial Services Ltd., 10430 – 144 Street, Surrey, BC, V3T-4V5, Canada investment expertise economy mutual funds investor consultation financial advisors decision making India investment decisions family size. 2012-01-20T23:20:50-05:00 2 3/4 328 345 2012-01-20T23:20:50-05:00 http://www.inderscience.com/link.php?id=45021 This study attempts to group investors into different segments based on their type (professional or individual investors) and, then, to examine whether there are differences in the various psychological biases and personality traits, as well as in their investment behaviour. The behavioural finance literature suggests four main factors that may influence investment behaviour: overconfidence, risk tolerance, self-monitoring and social influence. Adopting this approach, a cluster analysis of data from a representative survey of 345 investors in Greece has confirmed the existence of two main segments of investors: professionals and individuals. The results will expand investors' knowledge about the financial decision-making process and trading behaviour and will also reveal the differences in the trading behaviour between the groups of investors. Investors' trading activity, a behavioural perspective: professionals vs. individuals
Dimitrios Kourtidis; Željko Ševi?; Prodromos Chatzoglou
International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 346 - 366
This study attempts to group investors into different segments based on their type (professional or individual investors) and, then, to examine whether there are differences in the various psychological biases and personality traits, as well as in their investment behaviour. The behavioural finance literature suggests four main factors that may influence investment behaviour: overconfidence, risk tolerance, self-monitoring and social influence. Adopting this approach, a cluster analysis of data from a representative survey of 345 investors in Greece has confirmed the existence of two main segments of investors: professionals and individuals. The results will expand investors' knowledge about the financial decision-making process and trading behaviour and will also reveal the differences in the trading behaviour between the groups of investors.

]]> 10.1504/IJBAF.2011.045021 International Journal of Behavioural Accounting and Finance, Vol. 2, No. 3/4 (2011) pp. 346 - 366 Dimitrios Kourtidis; Željko Ševi?; Prodromos Chatzoglou Department of Accounting, Finance and Risk, Caledonian Business School, Glasgow Caledonian University, Cowcaddens Road, Glasgow G4 0BA, UK. ' Department of Accounting, Finance and Risk, Caledonian Business School, Glasgow Caledonian University, Cowcaddens Road, Glasgow G4 0BA, UK. ' Department of Production and Management Engineering, Democritus University of Thrace, Vasilissis Sofias 12, 67100 Xanthi, Greece behavioural finance trading behaviour trading activity professionals individuals professional investors individual investors psychological biases personality traits investment behaviour overconfidence risk tolerance self-monitoring social influence Greece. 2012-01-20T23:20:50-05:00 2 3/4 346 366 2012-01-20T23:20:50-05:00