Industry Herd Behavior in Financing Decision Making

Subject Areas : Financial Economics

Mahdieh Rezagholizadeh ^{1 *} , Majid Aghaei ² , Samaneh Shabanzadeh ³

1 - University of Mazndaran
2 - University of Mazandaran
3 - university of Mazandaran

Received: 2023-06-13 Accepted : 2024-10-28 Published : 2025-03-08

Keywords: Herd Behavior, Financing Decision Making, Capital Structure, Cross - Sectional Absolute Dispersion (CSAD),

Abstract :

Studying herd behavior in financial decision-making can contribute to the efficiency of financial markets. The herd behavior in the financial decisions about the financing of selected active industries listed on the Tehran Stock Exchange (Motor Vehicles and Auto Parts, basic metals, chemical products, metal ores mining and cement, lime & plaster) was studied during the period of 2015-2021. For this purpose, using the Cross-Sectional Absolute Dispersion (CSAD) method, the convergence of the capital structure of the selected companies toward the leading company's capital structure and also the convergence of the capital structure of the selected companies toward the average capital structure of all selected companies were examined to investigate the herd behavior in the industries' financing decisions. Furthermore, the herd behavior of industries in both bullish and bearish markets was studied. Furthermore, the herd behavior of industries in both bullish and bearish markets was studied. Based on the criteria for determining the leading company (By examining the asset and income levels of the selected companies) the Foolad Mobarakeh Steel Company was selected as the leader company. The results of estimation indicated that the examined industries followed the capital structure of the leader company (Foolad Mobarakeh Steel Company) in their financing decisions, while they did not follow to the average capital structure of all industries in this regard. Furthermore, the results indicate that the companies followed the behavior of the leader in their financing decisions during both bullish and bearish markets, and they did not follow to the average capital structure.