Evaluation of Investors' Mental Anchor Drivers based on Limitation of Derivative Financial Instruments

Document Type : Research Paper

Authors

1 Ph.D. Candidate in Accounting, Zanjan branch, Islamic Azad University, Zanjan, Iran.

2 Associate Professor of Accounting, Department of Accounting and Management, Zanjan University, Zanjan, Iran.

3 Assistant Professor of Accounting, Payam Noor University, Tehran, Iran.

4 Assistant Professor of Accounting, Zanjan branch, Islamic Azad University, Zanjan, Iran.

10.22103/jak.2022.20114.3761

Abstract

Objective: Usually doing transactions in the derivative market of a specific mechanism, which requires a sufficient level of knowledge of investors in this field. The same complexities in derivative financial instruments can be effective in stimulating the mental anchor drives of investors. Derivative financial instruments should be considered as a complex issue in the development of financial functions in investment decisions. Therefore, in order to reduce such restrictions in the use of financial derivative instruments, many accounting and financial standards drafting boards such as the Financial Accounting Standards Board "FASB" and the Australian Accounting Standards Board "AASB" respectively FASB 133 statements; They compiled FASB 137 and AASb 1033 with the aim of reducing the complications of using these tools. The purpose of this study is evaluation of investors' mental anchor drivers based on the limitation caused by derivative financial instruments.
Method: In terms of results, this research is considered a development because by relying on qualitative evaluation methods, it seeks to create a theoretical framework to determine the causes of the mental anchor drivers of investors and the sub-factors of restrictions on the use of derivative financial instruments. In fact, due to the lack of theoretical coherence regarding concepts and theories related to this field, this research seeks to expand theories and theoretical concepts to create more coherence for future studies. In other words, this research seeks to evaluate the mental anchor drivers of investors in the form of a model based on related researches in this field by establishing the criteria for the limitations of using derivative financial instruments. In terms of the purpose of this research, it is applied and in terms of its nature, it is descriptive/survey. In terms of the type of data, this research is considered a mixed method. In this research, firstly, to examine the related concepts of the research variables, meta-composite analysis method is used to analyze textual data with an inductive approach. Then, in the quantitative part, intuitive fuzzy analysis is used to answer the research questions. In this study, in the qualitative part, based on met synthesis processes, an effort was made to first identify the researches related to the two concepts of investors' mental anchor and derivative financial instruments, and then determine the components and themes of the research based on the critical appraisal scale. Also, in the continuation of the qualitative part, Delphi process was used to determine the limit of theoretical consensus. In the quantitative part, was used with the aim of determining the most effective drivers of the mental anchor of investors, due to the limitation caused by derivative financial instruments in the Tehran Stock Exchange (TSE), Intuitive Fuzzy Sets (IFSs). In this study, 13 of the experts in the (TSE) and at the university level participated in the qualitative part, and 25 of the TSE experts; the financial reporting experts and the issuer supervision department of the Tehran Stock Exchange (TSE) filled out the matrix questionnaires in the quantitative section.
Result: The results in the qualitative part indicate the existence of 5 themes of limitations caused by derivative financial instruments and 3 driving components of investors' mental anchor. The results in the quantitative part also showed based on the process of fuzzy Vikor process, the most important parameter of the research themes (limitations of using derivative financial instruments) is the lack of comparability. It was also found that cognitive drivers are the most effective measure of mental anchor in investors' decisions regarding restrictions on the use of derivative financial instruments.
Conclusion: The obtained result is an indication of this fact because investors are probably not aware of their perceptual errors in decision-making, they always use the basis of limited rationality to make decisions despite stress and uncertainty situations in decision-making and considering that the criterion of non-comparability as one of the limitations of derivative financial instruments is almost dominant in the Iranian market, this issue makes cognitive drivers play a role in the formation of mental anchors in the decision-making of investors. In fact, comparability as one of the indicators of information quality in the use of these tools can bring benefits such as reducing the cost of information processing, and it is through this mechanism that the level of fair valuations on the assets of companies can increase the integrity in the use of tools. Financial derivatives help. So that by increasing the ability to compare information, the possibility of comparing the similarities and differences between the value of companies is increased and on the other hand, the effort of analysts to understand and analyze financial statements and to better understand the relationship between economic events and company performance is reduced, both of which are an effective factor on The efficiency of the market and the optimal allocation of resources is in the form of expanding the collection of information available to investors and reducing the cost of information, and it provides opportunities to invest in derivative financial instruments.

Keywords

References

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Journal of Accounting Knowledge
Volume 14, Issue 2 - Serial Number 53
September 2023
Pages 25-51

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History

  • Receive Date: 21 August 2022
  • Revise Date: 18 November 2022
  • Accept Date: 26 November 2022

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