Investors' Behavioral Biases in Tehran Stock Exchange by emphasizing the Role of Significant Weaknesses in Internal Control

Subject Areas : Financial Economics

Mariyeh  Hasani ¹ (Department of Accounting, Gorgan Branch, Islamic Azad university, Gorgan, Iran)
Mansour  Gharkaz ² (Department of Accounting, Gorgan Branch, Islamic Azad University, Gorgan, Iran)
Alireza  Maetoofi ³ (Department of Managemant, Gorgan Branch, Islamic Azad University, Gorgan, Iran)
Hosein  Didehkhani ⁴ (Department of Managemant And Accounting, Ali Abad-katoul Branch, Islamic Azad University, Aliabad Katool, Iran)

Received: 2021-01-24 Accepted : 2021-06-25 Published : 2023-05-01

Keywords: Collective behavior, behavioral bias, Mental Anchor, Internal control,

Abstract :

Many behavioral biases affect investors when making decisions.Behavioral distortions divert the investor from rational decisions, and as a result, resources are not diverted to appropriate investments.Behavioral biases can be evaluated in different types including the two phenomena of mental anchor and collective behavior of investors. In the present study, the phenomenon of collective behavior and mental anchor of investors with emphasis on significant weaknesses in internal control has been investigated. For this purpose, the data of 125 companies listed on the Tehran Stock Exchange during the period 2012 to 2018 were used.Data analysis was performed in eviews software version 10 and in order to fit the regression models,the generalized least squares method of panel data was used. The results using univariate analysis showed that there is no significant difference between the amount of behavioral biases in each of the two groups of companies with weakness and lack of weakness in internal control.While multivariate analysis of data in the form of regression models showed that the auditor's report on significant weaknesses in internal control,(which Weakness indicates high agency costs and high information asymmetry between managers and shareholders) strengthens It is the collective behavior of investors but it has no effect on their mental anchor.According to the results, it seems that the behavioral biases of investors are conditioned by the priority and importance of good and bad news in the market.As long as there is bad news in the stock market towards the company, good news can’t cause behavioral bias in investors.

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