Assessing the Impact of Managers' Agency Motivation on Investment Portfolio Selection in the Framework of prospect Theory

Subject Areas : Journal of Investment Knowledge

najaf karami ¹ , Rasoul ABDI ² , nader rezaei ³ , asgar pakmaram ⁴

1 - Ph.D. Candidate. department of accounting. bonab branch. Islamic azad university.bonab . iran
2 - Assistant Professor. Department of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran.
3 - Assistant Professor. Department of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran
4 - Assistant Professor. Department of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran

Received: 2021-01-17 Accepted : 2021-03-02 Published : 2024-03-20

Keywords: portfolio selection, Agency Motivation, Prospect theory,

Abstract :

Agency theory mainly refers to the conflict of interests between management and ownership that managers may behave differently in investing despite contract incentives. Accordingly, in the present article, while examining the behavioral financial concepts, the behavioral portfolio theory is explained and then the effect of managers' motivation on the selection of investment portfolio is evaluated in the framework of prospect theory. In the present study, ten-year data on stock index yield and cash return Bahadar has been used from the beginning of 1389 to the end of 1398 and while separating test data into two parts of test and evaluation data based on quarterly returns of the first seven years, the proposed behavioral portfolio based on motivation and vision theory and calculation of returns and risk for 81 The proposed portfolio for the next three years is examined. The statistical test of the research hypotheses at an error level of 5% indicates that although the yield of the resulting portfolio was not significantly different between the classical and behavioral models, the risk of the behavioral financial portfolio was less than the classical portfolio

References:

آتشی گلستانی  حجت اله ، فیل سرایی مهدی( 1394) ،تئوری نمایندگی ، قراد داهای انگیزشی و معیار های اندازه گیری عملکرد  ، پژوهشگاه علوم انسانی ومطالعات فرهنگی

برادران حسن زاده، رسول،تقی زاده خانقاه، وحید، (1395)، تاثیر هزینه­های نمایندگی بر رفتار سرمایه گذاری، پژوهش­های حسابداری مالی و حسابرسی، 8(32)، 163-139.

حمیدیان، محسن، سلمانیان، مریم، (1394)، تئوری نمایندگی، سومین کنفرانس بین المللی پژوهش­های کاربردی در مدیریت و حسابداری.

رهنمای رودپشتی، فریدون، هیبتی، فرهاد، موسوی، سیدرضا، (1391)، بررسی الگوی ریاضی انتخاب پرتفوی سرمایه گذاری مبتنی بر مالی رفتاری، مجله مهندسی مالی و مدیریت اوراق بهادار، 12، 37-17.

هیبتی، فرشاد، تقوی، مهدی، موسوی، سیدرضا، (1393)، ارزیابی تاثیر شاخص­های کلاسیک و مدرن اندازه گیری ریسک بر انتخاب پرتفوی در چارچوب تئوری مالی رفتاری، فصلنامه علمی پژوهشی دانش مالی تحلیل اوراق بهادار، 7(21)، 99-87.

Berry, J., Karlan, D. &Pradhan, M., (2017). The impact of financial education for youth in Ghana, World Development.

Birnberg, J.G. (2011). A proposed framework for behavioral accounting research, Behavioral Research in Accounting, 23, 1-43.

Carpenter, J. (2000). Does Option Compensation Increase Managerial RiskAppetite ?, The Journal of Finance, 55(5), 2311-2331.

Dunn, D.S. (1989). Demonstrating a self-serving bias, Teaching of psychology, 16, 21-22.

Fan, Y. (2020). Does adversity affect long-term financial behaviour? Evidence from China’s rustication programme, Journal of Urban Economics, 115.

Festinger, L. (1957). A theory of cognitive dissonance, Stadford, C.A: Stanford University Press.

Fischoff, B. (1980). Hindsight/Foresight: The effect of outcome knowledge on judgment under uncertainty, Journal of Experimental Psychology: Human Perception and Performance, 1(3), 288-299.

Flynn, S.I. (2008). Behavioral Finance, Research Starters Business, pp. 11-13.

Grinblatt, M. & Titman, S. (1989). Adverse Risk Incentives and the Design of Performance-Based Contracts, Management Science, 35(7). 807-822.

Holmstrom, B. & Milgrom, P. (1987). Aggregation and Linearity in the Provision of Intertemporal Incentives, Econometrica. Vol. 55, No. 2, pp. 303-328.

Jensen, M. C. (1986). Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers. The American Economic Review, 76(2), 323-329.

Jiang, G., Lee, C.M.C., Yue, H, (2010), Tunneling Through Intercorporate Loans: The China Experience. Journal of Financial Economics, 98(3), 1-20.

Kahneman, D., Knetsch, J.L. & Thaler, R.H. (1991). The endowment effect, Loss aversion, and stayus quo bias: Anomalies, Journal of Economic Perspectives, 5(1), 193-206.

Kahneman, D., Slovic, P. & Tversky, A. (1982). Judgment under uncertainty: Heuristics and Biases, New York: Cambridge University Press.

Kahneman, D. & Tversky, A. (1979). Prospect theory: An analysis of decision under risk, Econometrica, 47, 263-291.

Kahneman, D. & Tversky, A. (1984). Choices, values, and frames, American Psychology, 39, 341-350.

Langer, E. (1975). The Illusion of control, Journal of Personality and Social Psychology, 32, 311-328.

Lazear, E. (2000). The Power of Incentives, The American Economic Review, Vol. 90, No. 2, May, pp. 1346-1361.

Lovallo, D. & Kahneman, D. (2000). Delusions of success, How optimism undermines executives` decisions, Harvard Business Review, 81(7), 56-63.

Lyandres E., Zhdanov A, (2003), Underinvestment or Overinvestment? The Effect of Debt Maturity on Investment, Simon Business School, Working Paper N. FR 03-28.

Montier, J. (2002). Behavioral finance: Insights into irrational minds and markets, West Sussex, England: John Wiley & Sons.

Myers S, (1977), Determinants of Corporate Borrowing, Journal of Financial Economics, 5(1), 146-175.

Odean, T. (1999). Do investors trade too much?, American Economic Review, 1279-1298.

Paule-Vianez, J., Gomez-Martinez, R. & Prado-Roman, C. (2020). A bibliometric analysis of behavioural finance with mapping analysis tools, European Research on Management and Business Economics.

Pompian, M. & Longo, J. (2004). A New Paradiam for Practical Application of Finance Behavioral: Creating Investment Programs Based on Personality Type and Gender to Produce Better Investment Outcomes, Journal of Wealth Management.

Samuelson, W. & Zeckhauser, R.J. (1988). Status quo bias in decision making, Journal of Risk and Uncertainty, 1(1), 7-59.

Savage, L.J. (1972). The foundations of statistics, 2^nd rev. ed. New York: Dover.

Shaikh, I.A. & O`Connor, G. (2020). Understanding the motivations of technology managers in radical innovation decisions in the mature R&D firm context: An Agency theory perspective, Journal of Engineering and Technology Management, 55.

Shefrin, H. & Statman, M. (1984). Explaining investors performance for cash dividends, Journal of Financial Economics, 13.

Starks, L. T. (1987). Performance Incentive Fees: An Agency Theoretic Approach, Journal of Financial and Quantitative Analysis, 22, pp- 17-32.

Statman, M. & Fisher, K.L. (2000). Cognitive biases and market forecasts, Journal of Portfolio Management.

Stromback, C., Skagerlund, K., Vastfjall, D. & Tinghog, G. (2020). Subjective self-control but not objective measures of executive functions predicts financial behavior and well-being, Journal of Behavioral and Experimental Finance, 27.

Shiller, R.J. (2000). Irrational Exuberance. Princeton, NJ: Princeton University Press.

Shleifer, Andrei. (2000). Inefficient Markets: An Introduction to Behavioral Finance. New York: Oxford University Press.

Thaler, R.H. (1980). Towards a positive theory of consumer choice, Journal of Economic Behavior and Organization, 1, 39-60.

Thaler, R.H. & Lamont, O.A. (2003). Anomalies: The law of one price in financial markets, Journal of Economic Perspectives, 17(4), 191-202.

Thaler, R.H. & Shefrin, H.M. (1988). The behavioral life-cycle hypothesis, Economic Inquiry.

Tversky, A. & Kahneman, D. (1988). Extensional Versus Intuitive Reasoning: The Conjunction Fallacy in Probability Judgment, Readings in Cognitive Science, 440-451.

Yurttadur, N. & Ozcelik, H. (2019). Evaluation of the Financial Investment Preferences of Individual Investors from Behavioral Finance: The Case of Istanbul, Procedia Computer Science, 158, 761-765.

Zaleskiewicz, T. (2006). Behavioral Finance, Handbook of Contemporary Behavioral Economics: Foundations and Developments.