Capital Structure Choices and Behavioral Biases: An Application to a Panel of US Industrial Companies

This paper examines the financing decision within the framework of the behavioral corporate finance. It empirically analyzes the role of psychological factors related to the managers’ overconfidence and optimism in explaining the financing choices of a panel of 160 US industrial companies listed ove...

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Main Author: Ridha Esghaier
Format: Article
Language:English
Published: EconJournals 2017-12-01
Series:International Journal of Economics and Financial Issues
Subjects:
Online Access:https://dergipark.org.tr/tr/pub/ijefi/issue/32006/353605?publisher=http-www-cag-edu-tr-ilhan-ozturk
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spelling doaj-5abb7a2ec1074fbc9721a66529ba81442020-11-25T02:19:49ZengEconJournalsInternational Journal of Economics and Financial Issues2146-41382017-12-01746086221032Capital Structure Choices and Behavioral Biases: An Application to a Panel of US Industrial CompaniesRidha EsghaierThis paper examines the financing decision within the framework of the behavioral corporate finance. It empirically analyzes the role of psychological factors related to the managers’ overconfidence and optimism in explaining the financing choices of a panel of 160 US industrial companies listed over the period from 2009 to 2015. Our findings confirm the positive and significant impact of managers’ overconfidence and optimism on the leverage of their firms. Our tests also highlight the negative and significant impact of the market mispricing perceived by the manager on the debt level of his firm, supporting its market timing behavior. A non-less interesting final result concerns the positive impact of managers' overconfidence on their pecking order preferences, thus rejecting the theoretical hypothesis under which the managers' overconfidence leads to a reverse pecking order preference over the financing sources.https://dergipark.org.tr/tr/pub/ijefi/issue/32006/353605?publisher=http-www-cag-edu-tr-ilhan-ozturkcapital structure optimism overconfidence market timing pecking order
collection DOAJ
language English
format Article
sources DOAJ
author Ridha Esghaier
spellingShingle Ridha Esghaier
Capital Structure Choices and Behavioral Biases: An Application to a Panel of US Industrial Companies
International Journal of Economics and Financial Issues
capital structure
optimism
overconfidence
market timing
pecking order
author_facet Ridha Esghaier
author_sort Ridha Esghaier
title Capital Structure Choices and Behavioral Biases: An Application to a Panel of US Industrial Companies
title_short Capital Structure Choices and Behavioral Biases: An Application to a Panel of US Industrial Companies
title_full Capital Structure Choices and Behavioral Biases: An Application to a Panel of US Industrial Companies
title_fullStr Capital Structure Choices and Behavioral Biases: An Application to a Panel of US Industrial Companies
title_full_unstemmed Capital Structure Choices and Behavioral Biases: An Application to a Panel of US Industrial Companies
title_sort capital structure choices and behavioral biases: an application to a panel of us industrial companies
publisher EconJournals
series International Journal of Economics and Financial Issues
issn 2146-4138
publishDate 2017-12-01
description This paper examines the financing decision within the framework of the behavioral corporate finance. It empirically analyzes the role of psychological factors related to the managers’ overconfidence and optimism in explaining the financing choices of a panel of 160 US industrial companies listed over the period from 2009 to 2015. Our findings confirm the positive and significant impact of managers’ overconfidence and optimism on the leverage of their firms. Our tests also highlight the negative and significant impact of the market mispricing perceived by the manager on the debt level of his firm, supporting its market timing behavior. A non-less interesting final result concerns the positive impact of managers' overconfidence on their pecking order preferences, thus rejecting the theoretical hypothesis under which the managers' overconfidence leads to a reverse pecking order preference over the financing sources.
topic capital structure
optimism
overconfidence
market timing
pecking order
url https://dergipark.org.tr/tr/pub/ijefi/issue/32006/353605?publisher=http-www-cag-edu-tr-ilhan-ozturk
work_keys_str_mv AT ridhaesghaier capitalstructurechoicesandbehavioralbiasesanapplicationtoapanelofusindustrialcompanies
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