Ownership concentration, risk aversion and the effect of financial structure on investment decisions

1998 ◽  
Vol 42 (9) ◽  
pp. 1751-1778 ◽  
Author(s):  
Guochang Zhang
Keyword(s):  
Risk Aversion ◽  
Investment Decisions ◽  
Financial Structure ◽  
Ownership Concentration

scholarly journals Does Ownership Concentration Affect Profitability and Dividend Policy? Evidence from Listed Banks in Jordan

2021 ◽  
Vol 18 ◽  
pp. 1019-1027
Author(s):  
Ahmad Dahiyat ◽  
Esra Al-Nsour
Keyword(s):  
Dividend Policy ◽  
Investment Decisions ◽  
Ownership Concentration ◽  
Agency Conflicts ◽  
Return On Equity ◽  
Controlling Shareholders ◽  
Large Shareholders ◽  
Simple Regression

This paper examines how the ownership concentration affects banks’ profitability and dividend policy in Jordan. All banks listed on the Amman Exchange were selected (16 banks) over the period 2010 to 2019. Ownership concentration was defined as the percentage of ownership that equals or exceeds 5%, while profitability was defined by return on equity; dividend policy was defined by the pay-out ratio. Simple regression was utilized to examine the effect; the result revealed that ownership concentration has a positive significant impact on profitability, which means that banks with higher ownership concentration have better profitability, this result justified by the view of the power that controlling shareholders can greatly use to require management to make decisions that improve the performance. The finding showed a negative significant impact on dividend policy, which indicates that the existence of large shareholders can reduce agency conflicts; and maximize the wealth of the company. It is recommended that related parties especially investors should take the concentration of ownership as an important factor to take their investment decisions, whether related to purchasing banks’ shares for various purposes, or expectations of potential dividends.

scholarly journals Effort, Idiosyncratic Risk and  Investment Under Uncertainty

2021 ◽  
Author(s):  
◽  
William S Taylor
Keyword(s):  
Risk Aversion ◽  
Executive Compensation ◽  
Absolute Risk ◽  
Investment Decisions ◽  
Idiosyncratic Risk ◽  
Capital Costs ◽  
Huge Impact ◽  
Uncertain Payoffs ◽  
Cara Utility ◽  
Constant Absolute Risk Aversion

<p>This thesis is based upon four very simple premises: 1. managers, not shareholders make the investment decisions for the firm; 2. managers do more than just say "yes" or "no" to investments, they can also exert effort that affects the payoff from investment; 3. executive compensation schemes can cause managers to hold more stock than is optimal for diversification purposes; and 4. many investments can be delayed and involve irreversible capital costs as well as uncertain payoffs. Combining these four premises gives the two central questions this thesis attempts to answer: 1. How does the level of managerial stock-ownership affect the investment decisions managers make for the firm? and 2. given the answer to (1), how does this affect the shareholder's decision to hire a manager? In this thesis I use a continuous time "Real Options" framework to answer these questions. The form of the utility function assumed for the manager has a huge impact on the tractability of the modelling. The assumption of Constant Relative Risk Aversion (CRRA) utility as opposed to Constant Absolute Risk Aversion (CARA) causes the manager's valuation of the cash  flow (the very first step of the modelling) to become wealth dependent. This in itself is an interesting issue, but it also poses interesting numerical issues and makes the later steps of the analysis intractable. Because of this we split the substantive analysis of this thesis into two parts. In the first we assume CARA utility in order to remove wealth dependence from the valuation and obtain a "clean path" to the end goal of a dynamic model of hiring, effort and irreversible investment. In the second we focus on CRRA utility thus allowing the manager's valuation to depend on his financial wealth. We then explain the resultant numerical issues, and the appropriate approach to their solution.</p>

Risk Aversion and Investment Decisions, Part III

2015 ◽  
pp. 181-205
Author(s):  
Jean-Pierre Danthine ◽  
John B Donaldson
Keyword(s):  
Risk Aversion ◽  
Investment Decisions

scholarly journals How financial literacy moderate the association between behaviour biases and investment decision?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohd Adil ◽  
Yogita Singh ◽  
Mohd. Shamim Ansari
Keyword(s):  
Risk Aversion ◽  
Interaction Effect ◽  
Financial Literacy ◽  
Investment Decision ◽  
Pearson Correlation ◽  
Investment Decisions ◽  
Male And Female ◽  
Content Type ◽  
Moderation Effect ◽  
The Impact

PurposeThe purpose of the study is to examine the impact of behavioural biases (i.e. overconfidence, risk-aversion, herding and disposition) on investment decisions amongst gender. The authors further examine the moderation effect of financial literacy in the relationship between behaviour biases and investment decisions amongst gender.Design/methodology/approachThe study considered a cross-sectional research design. For this survey, the data have been collected through a structured questionnaire from 253 individual investors of the Delhi-NCR region. To analyse the validity and reliability, the Pearson correlation and Cronbach's alpha test have been taken into account respectively. For testing the hypothesis, hierarchical regression analysis has been used in the study.FindingsThe results of the study reveal that amongst male investors, the influence of risk-aversion and herding on investment decision was negative and statistically significant, while the influence of overconfidence on investment decision was positive and significant. However, the influence of disposition was found statistically insignificant. The results stated that amongst female investors the effect of risk-aversion and herding on investment decision was negative and statistically significant. However, the effect of overconfidence and disposition was statistically insignificant influence the investment decision. It has been observed that financial literacy has significantly influenced investment decisions amongst male and female investors. The results of the interaction effect amongst male investors stated that the interaction between overconfidence and investment decision was significantly influenced by financial literacy. However, the interaction of financial literacy with the remaining three biases, i.e. risk-aversion, herding and disposition was found insignificant. The results for the interaction effect of financial literacy with overconfidence, risk-aversion, disposition and herding were found statistically significant amongst female investors.Research limitations/implicationsBased on this present research finding, the study is more productive for the portfolio manager and policymakers at the time of making an investment portfolio for the investors based on their behavioural biases. The study recommends that investors need training programmes, workshops and seminars that enhance financial literacy and financial knowledge of investors which helps them to overcome the behavioural biases while making an investment decision.Originality/valueThe current study aims to explore whether several behavioural biases can affect investment decisions amongst gender. Moreover, the authors would like to examine whether these associations are moderated by financial literacy. In this sense, financial literacy might also show a substantial part in the prediction of investments. The current study might be of the first study that examines the moderation effect financial literacy amongst male and female investors.

scholarly journals RISK AVERSION AND OVERCONFIDENCE IN GENDER PERSPECTIVE

2021 ◽  
Vol 2 (1) ◽  
pp. 42-49
Author(s):  
Clara Bella Jessica Arijaya ◽  
Sautma Ronni Basana
Keyword(s):  
Data Analysis ◽  
Risk Aversion ◽  
Significant Relationship ◽  
Investment Decisions ◽  
Financial Asset ◽  
Chi Square ◽  
Gender Perspective ◽  
The Relationship

This study analyzes the relationship between gender and risk aversion and overconfidence in making financial asset investment decisions for investors in Surabaya. The sample in this study amounted to 179 investors. Data were collected using a questionnaire. Methods of data analysis were performed using cross-tabulations and chi-square. This analysis shows that gender has a significant relationship with risk aversion and overconfidence in making financial asset investment decisions.

Risk Aversion and Investment Decisions, Part 1

2015 ◽  
pp. 115-141
Author(s):  
Jean-Pierre Danthine ◽  
John B Donaldson
Keyword(s):  
Risk Aversion ◽  
Investment Decisions
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