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The Relevance Of Psychology Theories To Financial Accounting

Author

Listed:
  • Victoria Bogdan

    (Professor of Accounting at the University of Oradea)

  • Ioana Teodora Mester

    (Assistant Professor of Statistics at the University of Oradea)

  • Dorina Nicoleta Popa

    (Assistant Professor of Financial statements analysis at the University of Oradea)

  • Diana Elisabeta Balaciu

    (Assistant Lecturer of Accounting at the University of Oradea)

Abstract

Starting from the interest that we have found in psychology sciences in order to understand better the way managers, analysts and last but not least investors behave in the decision making process our study focuses on the link between financial reporting, disclosure policies and investors judgment under uncertainty. The theoretical background describes the rational judgment of investors found in economic utility theories but also looks upon the main cognitive and social psychology for irrational behavior in the decision making process. Our research mainly focuses on measuring the influence of five psychological factors on the irrational behavior of potential investor. We showed that overconfidence occurs when investors overestimate the precision of their private signals and their knowledge about the value of a financial transaction and always remember the successfully times and easily forget the failures. Also, we have pointed out that limited attention is frequently associated with changing in disclosure policies and selfcontrol is negatively related to irrational behavior of investor.

Suggested Citation

  • Victoria Bogdan & Ioana Teodora Mester & Dorina Nicoleta Popa & Diana Elisabeta Balaciu, 2009. "The Relevance Of Psychology Theories To Financial Accounting," Romanian Economic Business Review, Romanian-American University, vol. 4(4), pages 111-124, Winter.
    • Handle: RePEc:rau:journl:v:4:y:2009:i:4:p:111-124
    as

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    References listed on IDEAS

    as
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    3. Shlomo Benartzi & Richard H. Thaler, 1995. "Myopic Loss Aversion and the Equity Premium Puzzle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 73-92.
    4. Daniel, Kent, 2004. "Discussion of: "Testing behavioral finance theories using trends and sequences in financial performance," (by Wesley Chan, Richard Frankel, and S.P. Kothari)," Journal of Accounting and Economics, Elsevier, vol. 38(1), pages 51-64, December.
    Full references (including those not matched with items on IDEAS)

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