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Investor’s Commitment Bias and Escalation of Firm’s Investment Decision

Author

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  • Fadhila HAMZA

    (University of Sfax, Tunisia)

  • Anis JARBOUI

    (University of Sfax, Tunisia)

Abstract

This study examines the reasons of perseverance in firm’s investment decision. It shows the possible influence of three closely related features which are: firm’s financial indicators, investor’s risk profile, and investor’s commitment bias, on a firm’s investment decisions escalation. This study aims to provide evidence as to whether investor considers the financial and risk’s perception features (financial strength and risk profile) to persevere his initial investment decision while he notes a high level of commitment bias. The proposed model of this paper uses GLM univariate data analyses to examine this relationship. Investor’s risk profile and his commitment bias have been measured by means of a questionnaire comprising several items. As for the selected sample, it has been composed of some 360 Tunisian individual investors. Our results have revealed that investors pay more attention to keep their psychology comfort than their financial comfort. It exposed the importance of the investor’s commitment bias and its risk perception in explaining investment decision escalation. Moreover results shows that there is strong and significant empirical relationship linking the escalatory behavior in investment decision and the interaction effects between the three independent variables. This means that, in practice, investors consider the three factors simultaneously.

Suggested Citation

  • Fadhila HAMZA & Anis JARBOUI, 2012. "Investor’s Commitment Bias and Escalation of Firm’s Investment Decision," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 15(2), pages 327-345, December.
    • Handle: RePEc:rom:econmn:v:15:y:2012:i:2:p:327-345
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    References listed on IDEAS

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    More about this item

    Keywords

    commitment bias; escalatory behavior; investor’s risk profile; firm’s financial strength indicator; investment level.;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • G3 - Financial Economics - - Corporate Finance and Governance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

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