Accountants' Risk-Taking and Alertness to Investment Opportunities

Iranian Journal of Accounting, Auditing and Finance

مقاله 6، دوره 8، شماره 1 - شماره پیاپی 26، فروردین 2024، صفحه 111-129   

نوع مقاله: Original Article

شناسه دیجیتال (DOI): 10.22067/ijaaf.2024.43938.1339

نویسندگان

Behrooz Badpa^{* 1}؛ Ruhollah Amareh²

¹Assistant Professor, Department of Accounting, Faculty of Literature and Humanities, Ilam University, Ilam, Iran

²Department of Accounting, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran.

چکیده

While accountants working in financial institutions possess extensive expertise in accounting, finance, and investment activities, it can be challenging to identify the primary factors influencing their investment decisions. This study examines the alertness of experienced accountants to investment opportunities (AIOs), with a particular focus on their propensity for risk-taking (RT). A random sample of 468 Iranian accountants, including accounting students and graduates from public and private institutions, was selected to achieve this. Data analysis was conducted using Structural Equation Modeling (SEM) and SPSS 26 software. In this study, financial intelligence, ambiguity tolerance, and optimism positively influenced RT and AIOs. Additionally, there was a positive relationship between RT and AIOs. However, it was observed that accounting education significantly impacted AIOs, whereas the propensity for RT decreased with age among accountants. From a theoretical perspective, the findings of this study can contribute to the understanding of decision-making processes among accountants, investors, and entrepreneurs, shedding light on the factors affecting their RT and AIOs. In terms of practical implications, the results of this study can be valuable for those involved in establishing rules and regulations, as well as educational planners. By promoting the best possible investments and rational decision-making, these insights can contribute to the optimal allocation and utilization of resources, facilitate job creation and entrepreneurship, and ultimately foster economic growth and development within society.

کلیدواژه‌ها

Alertness to Investment Opportunities؛ Ambiguity Tolerance؛ Experience Intelligence؛ Risk-Taking

مراجع

1. Almenberg, J., and Widmark, J. (2011). Numeracy, financial literacy, and participation in asset markets. SSRN Electronic Journal. 1(1), pp. 1–40. http://dx.doi.org/10.2139/ssrn.1756674.
2. Astebro, T., Herz, H., Nanda, R., and Weber, R. A. (2014). Seeking the roots of entrepreneurship:insights from behavioral economics. Journal of Economic Perspectives, 28(3), pp. 49–69. https://doi.org/10.1257/jep.28.3.49
3. Baker, H. K., and Nofsinger, J. R. (2002). Psychological biases of investors. Financial Services Review, 11(5), pp. 97–116.
https://www.proquest.com/openview/71733cc3dac821b5a48b3a06bf8da7ca/1?pq-origsite=gscholar&cbl=31458
4. Bakshi, G. S., and Chen, Z. (1994). Baby boom, population aging, and capital markets. Journal of Business, 67(2), pp. 163-202. https://doi.org/10.1086/296629
5. Barber, B., and Odean, T. (2001). Boys will be boys: Gender, overconfidence, and common stock investment. Quarterly Journal of Economics, 116, pp. 261–292. https://doi.org/10.1162/003355301556400
6. Bayar, Y., Sezgin, H. F., Öztürk, O. F., and Şaşmaz, M. U. (2020). Financial literacy and financial risk tolerance of individual investors: Multinomial logistic regression approach. SAGE Open, 10(3), pp. 1-11. https://doi.org/10.1177/2158244020945717
7. Bechara, A., Damasio, H., Tranel, D., and Damasio, A. R. (2005). The Iowa Gambling Task and the somatic marker hypothesis: some questions and answers. Trends in Cognitive Sciences. 9(4), pp. 159–162. https://doi.org/10.1016/j.tics.2005.02.002
8. Berman, K., Knight, J., and Case, J. (2008). Financial intelligence for entrepreneurs: what you need to know about the numbers. Cambridge, MA: Harvard: Business School Press. Cambridge.https://hbsp.harvard.edu/product/1915-PDF-ENG
9. Brand, M., Recknor, E. C., Grabenhorst, F., and Bechara, A. (2007). Decisions under ambiguity and decisions under risk: correlations with executive functions and comparisons of two different gambling tasks with implicit and explicit rules. Journal of Clinical and Experimental Neuropsychology, 29(1), pp. 86–99. https://doi.org/10.1080/13803390500507196
10. Budner, S. (1962). Intolerance of ambiguity as a personality variable. Journal of Personality,30(1), pp. 29–50. https://doi.org/10.1111/j.1467-6494.1962.tb02303.x
11. Cole, S., and Shastry, G. K. (2008). If you are so smart, why aren’t you rich? Education, financial literacy, and cognitive ability affect financial market participation. Cambridge, Mass: Harvard Business School. https://doi.org/10.2307/j.ctvc7778k.5
12. Cui, J., Sun, J., and Bell, R. (2021). The impact of entrepreneurship education on the entrepreneurial mindset of college students in China: The mediating role of inspiration and the role of educational attributes. The International Journal of Management Education, 19(1), pp. 100278-100296. https://doi.org/10.1016/j.ijme.2019.04.001
13. Dash, G., and Paul, J. (2021). CB-SEM vs PLS-SEM methods for research in social sciences and technology forecasting. Technological Forecasting and Social Change, 173, A. 121092. https://doi.org/10.1016/j.techfore.2021.121092
14. Endres, M. L., Chowdhury, S., and Milner, M. (2009). Ambiguity tolerance and accurate assessment of self-efficacy in a complex decision task. Journal of Management & Organization, 15, pp. 31–46. https://doi.org/10.1017/s1833367200002868
15. Foo, M. (2011). Emotions and entrepreneurial opportunity evaluation. Entrepreneurship Theory and Practice, 35(2), pp. 375-393. https://doi.org/10.1111/j.1540-6520.2009.00357.x
16. Fornell, C., and Larcker, D. F. (1981). Evaluating structural equation models with unobservables variables and measurement error. Journal of High Technology Management Research, 11(1), pp. 137-153. https://doi.org/10.2307/3151312
17. Furnham, A., and Ribchester, T. (1995). Tolerance of ambiguity: A review of the concept, its measurement and applications. Current Psychology, 14(3), pp. 179–199. https://doi.org/10.1007/bf02686907
18. Gerardi, K., Goette, L., and Meier, S. (2010). Financial literacy and subprime mortgage delinquency: evidence from a survey matched to administrative data. Federal Reserve Bank of Atlanta. Diane Publishing, 2010 SSRN Electronic Journal. 1(1), pp. 1-51. https://doi.org/10.2139/ssrn.1600905
19. Gakhar, D. (2019). Role of optimism bias and risk attitude on investment behaviour. Theoretical Economics Letters, 9, pp. 852-871. https://doi.org/10.4236/tel.[phone]
20. Grable, J. E. (2000). Financial risk tolerance and additional factors that affect risk taking in everyday money matters. Journal of Business and Psychology, 14(4), pp. 625-630. https://doi.org/10.1023/a:1022994314982
21. Grable, J. E., and Joo, S. H. (2000). A cross-disciplinary examination of financial risk tolerance. Consumer Interests Annual, 46(3), pp. 151-157. https://doi.org/10.1007/978-3-319-28887-1_2
22. Grable, J., and Lytton, R. H. (1999). Financial risk tolerance revisited: The development of a risk assessment instrument. Financial Services Review, 8(3), pp. 163-181. https://doi.org/10.1016/s1057-0810(99)00041-4
23. Green, C. P., and Heywood, J. S. (2011). Flexible contracts and subjective well‐being. Economic Inquiry, 49(3), pp. 716-729. https://doi.org/10.1111/j.1465-7295.2010.00291.x
24. Guiso, L., and Paiella, M. (2008). Risk aversion, wealth and background risk. Journal of the European Economic Association, 6(6), pp. 1109-1150. https://doi.org/10.1162/jeea.2008.6.6.1109
25. Hair, J. F., Hult, G. T. M., Ringle, C. M., Sarstedt, M., and Thiele, K. O. (2017). Mirror, mirror on the wall: a comparative evaluation of composite-based structural equation modeling methods. Journal of the Academy of Marketing Science, 45, pp. 616-632. https://doi.org/10.54055/ejtr.v6i2.134
26. Haws, M. K. (2021). Investor investment choices for better decision-making among investment options. A dissertation submitted in partial fulfillment of the requirements for the degree of PhD of Business Administration: Accounting. Baker College. Flint, Michigan. https://www.proquest.com/openview/b6970bc76db7460010c420cad83f272d/1?pq-
origsite=gscholar&cbl=18750&diss=y
27. Henseler, J., Ringle, C.M. and Sinkovics, R.R. (2009), The use of partial least squares path modeling in international marketing, Sinkovics, R.R. and Ghauri, P.N. (Ed.) New Challenges to International Marketing (Advances in International Marketing, Vol. 20), Emerald Group Publishing Limited, Bingley, pp. 277-319. https://doi.org/10.1108/S1474-
7979(2009)0000020014
28. Henseler, J., Dijkstra, T. K., Sarstedt, M., Ringle, C. M., Diamantopoulos, A., Straub, D. W., Ketchen, D. J., Hair, J. F., Hult, G. T. M., and Calantone, R. J. (2014). Common beliefs and reality about partial least squares: Comments on Rönkkö & Evermann (2013). Organizational Research Methods, 17(2), pp. 182-209. https://doi.org/10.1177/1094428114526928
29. Huhmann, B. A., and McQuitty, S. (2009). A model of consumer financial numeracy. International Journal of Bank Marketing, 27, pp. 270-293. https://doi.org/10.1108/02652320910968359
30. Hallahan, T., Faff, R., and McKenzie, M. (2003). An exploratory investigation of the relation between risk tolerance scores and demographic characteristics. Journal of Multinational Financial Management, 13(4-5), pp. 483-502. https://doi.org/10.1016/s1042-444x(03)00022-7
31. Hallahan, T., Faff, R., and McKenzie, M. (2004). An empirical investigation of personal financial risk tolerance. Financial Services Review, 13(1), pp. 57-78. https://www.proquest.com/docview/212017690
32. Hey, J. D. (1984). The economics of optimism and pessimism. Kyklos, 37(2), pp. 181–205. https://doi.org/10.1111/j.1467-6435.1984.tb00748.x
33. Igbokwe, D., Gesinde, A., and Adeoye, T. A. (2014). Development and validation of indices of financial intelligence among a cross-section of Nigerian private university students. International Journal of Business and Management Study, 1(3), pp. 76-80.https://www.researchgate.net/publication/306038231_DEVELOPMENT_AND_VALIDATIO
N_OF_INDICES_OF_FINANCIAL_INTELLIGENCE_AMONG_A_CROSS-SECTION_OF_A_NIGERIAN_PRIVATE_UNIVERSITY_STUDENTS
34. Kahneman, D., and Riepe, M. W. (1998). Aspects of investor psychology. Journal of Portfolio Management, 24(4), pp. 52–65. https://doi.org/10.3905/jpm.1998.409643
35. Kahneman, D., and Tversky, A. (1979). Intuition prediction: biases and corrective procedures. Management Science, 12, pp. 313-27. https://doi.org/10.1017/cbo9780511809477.031
36. Kamil, N. S. S. N., Musa, R., and Sahak, S. Z. (2014). Examining the role of financial intelligence quotient (FiQ) in explaining credit card usage behavior: A conceptual framework. Procedia - Social and Behavioral Sciences, 130, pp. 568-576. https://doi.org/10.1016/j.sbspro.2014.04.066
37. Kim, K. A. and Nofsinger, J. R. (2007). The Behaviour of Japanese Individual Investors during Bull and Bear Markets. The Journal of Behavioral Finance, 8(3), pp. 138-153. https://doi.org/10.1080/15427560701545598
38. Kock, N., and Lynn, G. S. (2012). Lateral collinearity and misleading results in variance-based SEM: An illustration and recommendations. Journal of the Association for Information Systems, 13(7), pp. 546-580. https://doi.org/10.17705/1jais.00302
39. Kock, N. (2015). Common method bias in PLS-SEM: A full collinearity assessment approach. International Journal of e-Collaboration, 11(4), pp. 1-10. https://doi.org/10.4018/ijec.2015100101
40. Krain, A. L., Wilson, A. M., Arbuckle, R., Castellanos, F. X., and Milhama, M. P. (2006). Distinct neural mechanisms of risk and ambiguity: a meta-analysis of decision-making. Neuroimage, 32, pp. 477–484. https://doi.org/10.1016/j.neuroimage.2006.02.047
41. Lusardi, A. (2008). Household saving behavior: The role of financial literacy, information, and RESEARCH ARTICLE 128
Behrooz Badpa & Ruhollah Amareh . IJAAF; Vol. 8 No. 1 Winter 2024, pp: 111-129 financial education programs. National Bureau of Economic Research, NBER Working Paper No. 13824. Federal Reserve Bank of Boston, 2009, pp. 109-149. https://doi.org/10.3386/w13824
42. Meza, D., and Southey, C. (1996). The borrower’s curse: optimism, finance and entrepreneurship. Economic Journal, 106(435), pp. 375–386. https://doi.org/10.2307/2235253
43. Mitchell, R. K., Busenitz, L., Lant, T., McDougall, P. P., Morse, E. A., and Smith, J. B. (2002). Toward a Theory of Entrepreneurial Cognition: Rethinking the People Side of Entrepreneurship Research. Entrepreneurship Theory and Practice, 27(2), pp. 93–104. https://doi.org/10.1111/1540-8520.00001
44. McInish, T. H. (1982). Individual investors and risk-taking. Journal of Economic Psychology, 2(2), 125–136. https://doi.org/10.1016/0167-4870(82)90030-7
45. Morin, R. A., and Suarez, A. F. (1983). Risk aversion revisited. Journal of Finance, 38(4), pp. 1201-1216. https://doi.org/10.1111/j.1540-6261.1983.tb02291.x
46. Morris, M. H., Webb, J. W., Fu, J., and Singhal, S. (2013). A Competency-Based Perspective on Entrepreneurship Education: Conceptual and Empirical Insights. Journal of Small Business Management, 51(3), pp. 352–369. https://doi.org/10.1111/jsbm.12023
47. Naeiji, M., and Esfandiari, Z. (2015). The effect of overconfidence and optimism on decision to start innovative activities: the mediating role of risk perception (Case study: the companies of university incubators). Journal of Entrepreneurship Development, 8(3), pp. 531-550 [In Persian]. 10.22059/JED.2015.57649
48. Ng, D. (2013). Seeing through the fog of ambiguity: Entrepreneurial judgments under decision settings of complexity. Human Systems Management, 32(1), pp. 57–66. https://doi.org/10.3233/hsm-130784
49. Nguyen, L. T. M., Gallery, G., and Newton, C. (2016). The influence of financial Risk tolerance on investment decision-making in a financial advice context. Australasian Accounting, Business and Finance Journal, 10(3), pp. 3-22. https://doi.org/10.14453/aabfj.v10i3.2
50. Pålsson, A.-M. (1996). Does the degree of relative risk aversion vary with household characteristics? Journal of Economic Psychology, 17(6), pp. 771–787. https://doi.org/10.1016/s0167-4870(96)00039-6
51. Pompian, M. M. (2006). Behavioural finance and wealth management: How to build optimal portfolios that account for investor biases. New York: John Wiley & Sons, Inc. New York, U.S.
https://doi.org/10.1002/9781119202400
52. Puri, M., and Robinson, D.T. (2007). Optimism and economic choice. Journal of Financial Economics, 86(1), pp. 71-99. https://doi.org/10.1016/j.jfineco.2006.09.003
53. Remund, D. L. (2010). Financial literacy explicated: The case for a clearer definition in an increasingly complex economy. Journal of Consumer Affairs, 44(2), pp. 276–295. https://doi.org/10.1111/j.1745-6606.2010.01169.x
54. Richter, N. F., Cepeda, G., Roldán, J. L., and Ringle, C. M. (2016). European management research using partial least squares structural equation modeling (PLS-SEM). European Management Journal, 34(6), pp. 589–597. https://doi.org/10.1016/j.emj.2016.08.001
55. Sages, R. A., and Grable, J. E. (2010). Financial numeracy, net worth, and financial management skills: client characteristics that differ based on financial risk tolerance. Journal of Financial Service Professionals, 64(6), pp. 57-65. https://fpperformancelab.org/wp-content/uploads/Financial-Numeracy-Net-Worth-and-Financial-Management-Skills-Client-Characteristics-that-Differ-based-on-Financial-Risk-Tolerance.pdf
56. Sahi, S. K. (2017). Psychological biases of individual investors and financial satisfaction. Journal of Consumer Behaviour, 16(6), pp. 511–535. https://doi.org/10.1002/cb.1644
57. Sahi, S. K., Dhameja, N., and Arora, A. P. (2012). Predictors of preference for financial investment products using CART analysis. Journal of Indian Business Research, 4(1), pp. 61–86. https://doi.org/10.1108/17554191211206807
58. Shefrin, H. (2002). Beyond greed and fear: Understanding behavioural finance and the psychology of investing. Boston: Harvard Business School Press. https://doi.org/10.1093/0195161211.001.0001
59. Simon, M., and Houghton, S. M. (2003). The relationship between overconfidence and introducing risky products: Evidence from a field study. Academy of Management Journal, 46(2), pp. 139-149. https://doi.org/10.2307/30040610
60. Slovic, P. (1972). A psychological study of human judgment: Implications for investment decision making. The Journal of Finance, 27(4), pp. 779–799. https://doi.org/10.1111/j.1540-6261.1972.tb01311.x
61. Stone, M. (1974). Cross-validatory choice and assessment of statistical predictions. Journal of the Royal Statistical Society, 36(2), pp. 111-147. https://doi.org/10.1111/j.2517-6161.1974.tb00994.x
62. Tenenhaus, M., Amato, S., and Esposito Vinzi, V. (2004, June). A global goodness-of-fit index for PLS structural equation modelling. In Proceedings of the XLII SIS scientific meeting, 1(2),pp. 739–742. https://doi.org/10.1002/cem.917
63. Thaler, R. H. (1999). Mental accounting matters. Journal of Behavioral Decision Making, 12(3), pp. 183–206. https://doi.org/10.1002/(sici)1099-0771(199909)12:3<183::aid-bdm318>3.0.co;2-f
64. Toricelli, M., Pereira, A. A. R., Abrao, G. S., Malerba, H. N., Maia, J., Buck, H. S., and Viel, T. A. (2021). Mechanisms of neuroplasticity and brain degeneration: strategies for protecting during aging. Neural Regen Res, 16(1), pp. 58-67. https://doi.org/10.4103/1673-5374.286952
65. Tversky, A., and Kahneman, D. (1981). The Framing of Decisions and the Psychology of Choice. Science, 211(4481), pp. 453–458. https://doi.org/10.1126/science.7455683
66. Wallach, M. A., and Kogan, N. (2007). Aspects of judgment and decision making: Interrelationships and changes with age. Behavioral Science, 6(1), pp. 23–36. https://doi.org/10.1002/bs.3830060104
67. Weber, M., Weber, W. U., and Nosic, A. (2012). Who takes risks when and why: Determinants of changes in investor risk taking. Review of Finance, 17(3), pp. 847-883. https://doi.org/10.1093/rof/rfs024
68. Weinstein, N. D. (1980). Unrealistic optimism about future life events. Journal of Personality and Social Psychology, 39(5), pp. 806–820. https://doi.org/10.1037/0022-3514.39.5.806
69. Wetzels, M., Odekerken-Schröder, G., and Van Oppen, C. (2009). Using PLS path modeling for assessing hierarchical construct models: Guidelines and empirical illustration. Management Information Systems Quarterly, 33(1), pp. 177-195. https://doi.org/10.2307/20650284
70. Yao, R., Sharpe, D. L. and Wang, F. (2011). Decomposing the age effect on risk tolerance. The Journal of Socio-Economics, 40(6), pp. 879-887. https://doi.org/10.1016/j.socec.2011.08.023
71. Xu, H., and Tracey, T. J. G. (2014). The role of ambiguity tolerance in career decision making. Journal of Vocational Behavior, 85(1), pp. 18–26. https://doi.org/10.1016/j.jvb.2014.04.001