Investigating the Effect of Investors' Mental Accounting on Investment and Financing Policies

Document Type : Research Paper

Authors

1 Ph.D. Candidate of Accounting, Neyshabur Branch, Islamic Azad University, Neyshabur, Iran.

2 Associate Professor of Accounting, Neyshabur Branch, Islamic Azad University, Neyshabur, Iran.

3 Assistant Professor of Accounting, Sabzevar Branch, Islamic Azad University, sabzevar, Iran.

4 Assistant Professor of Accounting, Neyshabur Branch, Islamic Azad University, Neyshabur, Iran.

10.22103/jak.2021.17368.3453

Abstract

Objective: Behavioral finance is one of the most important financial issues and the attention of financial researchers in this field is increasing. Because errors and biases occur due to human tendency to shortcuts and overemphasis on experience, unfounded feelings, delusions and finger calculations, and in general distance from reality, although in some cases these biases are possible. May have positive results, but the probability of negative results is very high. Among the types of behavioral biases, mental accounting is an economic concept that has been less studied. The purpose of this study is to investigate the effect of mental accounting on the financing and investment policies of companies listed on the Tehran Stock Exchange
 Methods: The statistical population of the research includes 14 top investment companies during the period 2013-2019. In this study, the variables of financial leverage, cash dividend, debt ratio, debt maturity and the ratio of long-term debt to equity as indicators of financing policy and the variables of tangible fixed assets changes, changes in non-current assets, changes in capital - Long-term investments and changes in total fixed assets and long-term investments were used as investment policy indicators.
 
Results: The results show that investors' mental accounting has a significant inverse effect on financial leverage, cash dividends and a direct effect on debt ratio, debt maturity and the ratio of long-term debt to equity as indicators of corporate financing policy. In addition, the results showed that investor mental accounting has an adverse effect on changes in tangible fixed assets, changes in non-current assets, changes in long-term investments, and changes in total fixed assets and long-term investments as indicators of corporate investment policy.
 Conclusion: The results indicate that the mental accounting of investors has a significant effect on the financing and investment policies of companies listed on the Tehran Stock Exchange. As a result, the behavioral and emotional conditions of investors must be taken into account because investors are not entirely rational and make the wrong decisions in terms of emotions in the decision-making process. Investor bias causes stock prices to deviate from real prices and leads to incorrect stock pricing. Improper pricing of companies' shares affects financing decisions and, consequently, the company's investment decisions, and causes the decisions of the company's governing bodies to deviate from the optimal investment decisions.

Keywords

References

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Journal of Accounting Knowledge
Volume 12, Issue 4 - Serial Number 47
December 2021
Pages 137-153

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History

  • Receive Date: 11 April 2021
  • Revise Date: 11 July 2021
  • Accept Date: 27 July 2021

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