Theory Of Games And Economic Behaviour - 968 Words

Although rationality provides the foundation for behavioural decision theory, current findings suggest that heuristics and biases have a significant impact on individual decision making. Rationality can only go so far in explaining individual decision making. A large part of early research into decision theory was based on the economic or normative approach, which tries to predict the actions of a so called ‘rational decision maker’. Although Bernoulli (1738) was the first to introduce the concept of utility into decision making, it was Von Neumann and Morgenstern’s book, ‘Theory of Games and Economic Behaviour’ which revolutionised the idea of a rational decision process. Von Neumann and Morgenstern (1947) explicitly outlined the†¦show more content†¦In contrast, EU theory suggests people have different attitudes toward risk – some would be risk averse and prefer the guaranteed payment, even though the expected value is lower, while others would choose the riskier bet. However, EU Theory and the normative approach to decision making are not without criticisms. As with every mathematical model, EU theory is a simplified representation of reality and does not guarantee reliable predictions o f human behaviour. Indeed, empirical evidence suggests the existence of systematic deviations from rationality. As Dawes (1988) wrote, â€Å"People, groups, organizations, and governments make choices. Sometimes the consequences of their decisions are desirable, sometimes not† (p. 2). Hence it can be argued that decision making is not purely rational (where rationality is defined as the decision predicted by EU Theory). In in attempt to create a more psychologically accurate description of decision making, Kahneman and Tversky (1979) developed Prospect Theory, which theorized that individuals have different perceptions when considering losses versus gains. In contrast to EU Theory, which suggests we make decisions that maximise our utility, research by Kahneman and Tversky (1979) found that information is not processed in such a rational way. For example, according to EU Theory, the amount of utility gained by receiving $200 should be equal to receiving $300 and losing $100 as in both situations

Conservatism In Tehran Stock Exchange Finance Essay - Free Essay Example

Sample details Pages: 7 Words: 1987 Downloads: 9 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? The aim of this study is to investigate the relationship between accounting conservatism and dividend policy in Tehran Stock Exchange. To do so, a sample of 90 firms is selected to be studied during the period of 2004 to 2011. Basu (1997) model is extended for measuring accounting conservatism. The results show the there is not significant relationship between accounting dividend policy and conservatism in TSE. Key words: accounting conservatism, dividend policy and Tehran Stock Exchange Don’t waste time! Our writers will create an original "Conservatism In Tehran Stock Exchange Finance Essay" essay for you Create order 1. INTRODUCTION Accounting conservatism has been long a subject of scrutiny by both standard setters and accounting researchers. Recently more debates have been on accounting conservatism as a result of standard setters decision to omit it from conceptual framework. Some argues that accounting conservatism has information content while others believe that it does not benefit for stockholders (Shorevarzi et al., 2009). Accounting conservatism is traditionally defined by the adage anticipate no profit, but anticipate all losses (Watts, 2003). Givoly and Hayn (2000) define accounting conservatism as the choice of an accounting approach that in uncertainties leads to recognize the least assets and revenue and have the lowest positive impact on equity. According to Basu (1997), accounting conservatism is asymmetric timeliness of loss and gains recognition. Gao (2011) defines conservatism as more supportive evidence for good news than bad news. However, managers face many incentives that affect their tendency for good or bad news recognition. They may recognize bad news timely for tax purpose and saving their reputation or delay it for avoiding credit rate reduction which increases their cost of capital (Zhen Qi, 2011). On the other hand, dividend policy is one of the most important areas in finance literature. Dividends can play a useful role in the world of significant agency problems between corporate insiders and outsiders. Insiders return corporate earnings to investors by paying dividends and hence are no longer capable of using these earnings to benefit themselves. Payment of dividends makes companies to need capital gathering, and hence gives outside investors an opportunity to exercise some control over the insiders at that time (Easterbrook, 1984). In this regard, Booth and Chang (2011) find that since the mid-1980s the difference in information asymmetry between dividend- and non-dividend-paying firms has increased sharply, before the mid-1980s the market did not differentiate strongly between them, but subsequently the market has reacted less negatively to announcements by dividend payers. The linkage between accounting conservatism and dividend policy is important because both can be served as a tool for reducing agency cost. More conservatism is expected to reduce agency cost while reduce earning management. In addition, more payout policy can also reduce agency cost through reduction of renounces under control of mangers. Managers may not have a willing to distribute cash to maintain their control in firm which in turn may cause that they use these resources to invest in unfavorable investments. In addition, anticipating all future losses cause the reduction of income and consequently reduces dividend payout (Watts, 1993). However, it is expected that more dividend payout results in more conservatism in case they serve as a tool to reduce agency cost. The main aim of the study is to investigate this relationship. 2. LITRATURE REVIWE Mashayekhi et al. (2009) investigated the relationship between conservatism and dividend level and earnings persistency. They found that increasing conservatism leads to decreasing dividend. Moreover, they indicated that decreasing earnings persistency does not result in increasing conservatism. Ahmed et al. (2002) investigated the role of accounting conservatism in mitigating bondholder-shareholder conflicts over dividend policy and in reducing debt costs. They find that firms facing more severe conflicts over dividend policy tend to use more conservative accounting. Furthermore, they document that accounting conservatism is associated with a lower cost of debt after controlling for other determinants of firms debt costs. Frankel et al. (2008) find that the asymmetric timeliness of cash flows is significantly related to the asymmetric sensitivity of shareholder payouts. On the basis of their other measures of conservatism (earnings skewness and accumulated nonoperating accruals) the y show that these measures are also not significantly related to the sensitivity of shareholder payouts given bad news. Their results suggest that accounting policies do not significantly constrain shareholder distributions conditional on news that does not affect cash flows. Dewenter and Warther (1998) find that information asymmetries or agency conflicts affect dividend policy. Li and Zhao (2008) find that firms that are more subject to information asymmetry are less likely to pay, initiate, or increase dividends, and disburse smaller amounts. Iyengar and Zampelli (2010) investigated whether or not there is a link between conservative accounting practices and the sensitivity of executive pay to accounting performance. They find that the sensitivity of executive pay to accounting performance is higher for firms that report conservative accounting earnings. 3. HYPOTHESES DEVELOPMENT H1.There is a relationship between accounting dividend payout and conservatism in firms listed in TSE. To investigate above hypothesis in detail, we break accounting conservatism into timeliness of bad news recognition and timeliness of good news recognition. It is expected that recognition of bad news in a firm affects dividend payout. Firms facing bad conditions in business have less tendency to distribute dividend and vice versa. However, following hypothesis is posited: H1a. The timeliness of bad news recognition is negatively related to dividend payout. In addition, it is expected that recognition of good news in a firm affects dividend payout. Firms facing bad conditions in business have more tendency to distribute dividend and vice versa. However, following hypothesis is posited: H1b. The timeliness of good news recognition is positively related to dividend payout. 4. METHODOLOGY AND DATA COLLECTION Present study is applied research regarding classification based on goal. The aim of the applied research is to develop applying knowledge in the given subject. In addition, since the study tries to find a relationship between dividend payout and accounting conservatism, the method of study is empirical correlation. The aim of this sort of study is to determine the relationship between the research variables. Using regression and Pierson correlation the relationship between dividend payout and accounting conservatism is investigated. To do so, firstly Basu (1997) is extended to include dividend. After testing first hypothesis using model 1, research sample is separated into two groups namely the firms with negative return to capture asymmetric timeliness of bad news and the firms with positive return to capture asymmetric timeliness of bad news. The population of the study includes all listed firms in TSE. However, to have a reasonable homogenous population, the following conditions are considered in data gathering: 1. Information must be available for the past 8 years. 2. Fiscal year must be ended at the end of year. 3. Transaction intervals must not be more than 3 month. 4. Data must be available for testing hypotheses. 5. Sample firms must not be investment, bank or financing firm. As a result of these conditions a sample of 70 firms was obtained and studied during the period between 2004-2012. Literature and conceptual framework were gathered by documental method. Financial statement and notes issued by TSE were used as a research tool. In addition, Rahavarde Novin software was applied to extract the research data. Models and variables definition To test the main hypothesis, following Zhen Qi (2011) methodology Basu (1997) model is extend to capture dividend policy effect on conservatism as following: (1) Where: EARN is firms net income before extraordinary items, RET is annual buy-and-hold returns, D is an indicator variable equal to 1 if returns (RET) are negative, and 0 if returns are positive, DIV is firms dividend policy captured by dividing cash dividend by net income. The coefficient of the three-way interaction between DIV, returns, and the negative return dummy captures the difference in the degree of asymmetric timeliness of earnings between high dividend payers firms and low dividend payers firms. We predict that the coefficient of the interaction between RET, D, and DIV (ÃÆ'Ã… ½Ãƒâ€šÃ‚ ±7) is negative and significant, indicating that high dividend payers firms report earnings in a less conservative manner. First and second sub-hypotheses are tested through following regression for bad news and good news separately. (2) Where all variables are defined as previous model, negative and significant interaction between DIVÃÆ'Æ’-RET proves sub-hypothesis 1, and positive and significant interaction between DIVÃÆ'Æ’-RET proves sub-hypothesis 2. 5. EMPRICAL RESULTS 5.1. Descriptive statistic Descriptive statistic only reports an image of data distribution of research and does not report the relationships between variables. Research descriptive statistic is shown in Table 1. Table 1. Descriptive statistic DIV D EARN RET Mean 1.049526 0.354167 0.170649 34.03626 Median 0.670000 0.000000 0.149539 12.80000 Maximum 100.0000 1.000000 6.762778 820.1600 Minimum 9.432275 0.000000 -2.695823 -79.64000 Std. Dev. 4.197662 0.478592 0.363669 82.89660 Skewness 19.38364 0.609850 9.517949 3.534478 Kurtosis 440.3771 1.371917 176.0665 23.83058 Coefficient of variation 3.999579 1.351317 2.131094 2.435538 Notes: DIV is dividend, D is dummy variable, EARN is net income before extraordinary items, RET annual buy-and-hold returns. 5.2. Correlation Correlation between research variables is presented in Table 2. Table 2. Correlation Matrix DIV D EARN RET DIV 1.000000 D 0.013203 1.000000 EARN -0.028274 -0.008812 1.000000 RET -0.037736 -0.507693 -0.043648 1.000000 As it is shown in Table 2, the correlation between variables is negative except for the relationship between dividend and dummy variable. The low correlation between variables also shows that there is not collineary problem. 5.3. Hypotheses test H1.There is a relationship between dividend payout and accounting conservatism in TSE. To test this hypothesis model 1 regressed. The results of model regression are presented in Table 3. Table 3. Regression of the relationship between conservatism and dividend payout Variable Coefficient Std. Error t-Statistic Prob. C 0.193784 0.020928 9.259409 0.0000 RET -0.000277 0.000194 -1.430914 0.1529 D -0.087339 0.036886 -2.367784 0.0182 RETD 0.001552 0.000255 6.078255 0.0000 DIV -0.001661 0.004058 -0.409375 0.6824 DIVRET -1.59E-05 7.94E-05 -0.200868 0.8409 DIVD 0.010483 0.020668 0.507205 0.6122 DIVRETD 0.000177 0.000294 0.601002 0.5480 R-squared 0.053801 Adjusted R-squared 0.044432 Durbin-Watson 2.140430 F-statistic 5.742835 Prob(F-statistic) 0.000002 The results of hypothesis test show that there is not significant relationship between dividend policy and accounting conservatism. This result indicates that dividend policy of TSE firms does not impact on their conservatism. However, our hypothesis is rejected. The value of Durbin-Watson stat (2.14) shows that there is not auto-correlation problem in models residual. H1a. The timeliness of bad news recognition is negatively related to dividend payout. To test this hypothesis model 2 regressed for only negative return sample. The results of model regression are presented in Table 4. Table 4. Regression of timeliness of bad news recognition and dividend payout Variable Coefficient Std. Error t-Statistic Prob. C 0.082625 0.057761 1.430449 0.1538 RET -0.003748 0.001867 -2.008257 0.0457 DIV 0.006796 0.028555 0.237990 0.8121 DIVRET 0.000251 0.000413 0.609650 0.5426 R-squared 0.016612 Adjusted R-squared 0.004858 F-statistic 1.413342 Durbin-Watson stat 2.106888 Prob(F-statistic) 0.239367 The results of hypothesis test show that there is not significant relationship between bad news recognition and dividend payout. However, the hypothesis is rejected. The value of Durbin-Watson stat (2.10) shows that there is not auto-correlation problem in models residual. H1b. The timeliness of good news recognition is positively related to dividend payout. To test this hypothesis model 2 regressed for only positive return sample. The results of model regression are presented in Table 5. Table 5. Regression of timeliness of good news recognition and dividend payout Variable Coefficient Std. Error t-Statistic Prob. C 0.189575 0.015672 12.09624 0.0000 RET -0.000210 0.000146 -1.436260 0.1516 DIV -0.001440 0.003029 -0.475559 0.6346 DIVRET -2.30E-05 5.93E-05 -0.387659 0.6984 R-squared 0.007079 Adjusted R-squared 0.000546 F-statistic 1.083629 Durbin-Watson stat 1.803134 Prob(F-statistic) 0.355669 The results of hypothesis test show that there is not significant relationship between good news recognition and dividend payout. However, the hypothesis is rejected. The value of Durbin-Watson stat (1.80) shows that there is not auto-correlation problem in models residual. 6. DISCUSSION AND CONCLUSION The aim of this study was to investigate the relationship between accounting conservatism and dividend policy in Tehran Stock Exchange. To do so, a sample of 90 firms is selected to be studied during the period between 2004 to 2011. Basu (1997) model was extended for measuring accounting conservatism. The results show the there is not significant relationship between accounting dividend policy and conservatism in TSE. These results suggest that mangers of TSE firms do not use dividend and conservatism as a tool for reduction of agency cost at the same time. In addition, the results in detail show that not only timeliness of good news does not affect dividend policy nor timeliness of good news does. This result may be from the fact that TSE firms smooth dividend payout regardless good or bad news. On the whole, in can be suggested from the results that inferred that TSE firms do not use dividend and conservatism as a tool for reduction of agency cost at the same time, to do so.

Huntington And Mamdani s Views On Culture And Islam

Huntington and Mamdani make two very different arguments. They both make points about what causes conflict. Huntington describes his theories on a future â€Å"clash of civilizations† while Mamdani argues that 9/11 did not happen because of a clash of civilizations. Mamdani also disagrees with Huntington’s opinions on culture and Islam. Huntington believes that the world can be organized by civilizations based on culture instead of political or economic systems. Huntington focuses on two civilizations, Western civilization and Islamic civilization. Huntington believes that these civilizations will face inevitable conflict. The sources of conflict may be struggles for military, economic, and institutional power or it may come from differences in basic values and beliefs between the two cultures. Huntington states â€Å"It is my hypothesis that the fundamental source of conflict in this new world will not be primarily ideological or primarily economic. The great divisions among humankind and the dominating source of conflict will be cultural...the clash of civilizations will dominate global politics. The fault lines between civilizations will be the battle lines of the future† (Huntington, pg. 22). Mamdani says Huntington’s argument â€Å"was built around two ideas: that since the end of the Cold War ‘the iron curtain of ideology’ had been replaced by a ‘velvet curtain of culture,’ and that the velvet curtain had been drawn across ‘the bloody borders of Islam† (Mamdani, pg. 21).Show MoreRelatedMuslims After 9/112726 Words   |  11 Pagesconstantly fighting against prejudice. After September 11, media interest in Islam increased, where Islam was usually portrayed in a negative way. Before 9/11, many Muslims lived the normal, everyday life. However, the attack has changed lives of many people that belonged to the Muslim community, where they were the victims of guilt. Unfortunately, many Americans were introduced to Islam, after the 9/11 attack, thus even till today, Islam is associated with terrorism. For the past ten years, Muslims felt excludedRead MoreOne Significant Change That Has Occurred in the World Between 1900 and 2005. Explain the Impact This Change Has Made on Our Lives and Why It Is an Important Change.163893 Words   |  656 PagesPublic Memories Tiffany Ruby Patterson, Zora Neale Hurston and a History of Southern Life Lisa M. Fine, The Story of Reo Joe: Work, Kin, and Community in Autotown, U.S.A. Van Gosse and Richard Moser, eds., The World the Sixties Made: Politics and Culture in Recent America Joanne Meyerowitz, ed., History and September 11th John McMillian and Paul Buhle, eds., The New Left Revisited David M. Scobey, Empire City: The Making and Meaning of the New York City Landscape Gerda Lerner, Fireweed: A Political

Effects of Computer Addiction on the Academic Performance of the Students free essay sample

It is known that we are living in technological era. The computers become irreplaceable tool in everyday life of almost each person. The adult users generally use it for business purposes while youngsters for computer games. Computers became the part of our life and very important component in the spheres of the life is leisure. Nowadays, majority of young people spend their leisure time playing computer games, surfing through the internet. Computer games have become one of the favorite time-spending of young people in all ages, and even some adults and the students. With permanent development of computer technology the quality of people using computer either for working purposes or entertainment purposes is increasing speedily. There are many things that causes addiction to computer games, one reason being, is that most students just need something to occupy their time and these games do that for countless hours. Some students use computer gamings and surfings to escape their reality which can include school, work and possibly personal problems. We will write a custom essay sample on Effects of Computer Addiction on the Academic Performance of the Students or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Computer games also represent students to challenges they can overcome so they can feel a sense of accomplishments in virtual world, mistakes can be undone and time can review itself with the push of a few buttons. Computer has lots of effects on the learning of the students. For most part, research on computer addiction has its effects and disadvantages of the students. Statement of the problem 1. What are causes of computer addiction and its effects on the student learning? 2. ) What are the possible solutions in order to stop this addiction? General Objective * To know the effects of computer addiction on the school performance of the students * To find out the answer on why students get addicted to computers and find possible solutions to stop it. Hypothesis Through other activities and with the proper guidance of the parents the give to their children, their addiction on computers can be lessen Scope and Delimitation The students of the City College of Tagaytay Importance/Significance of the Research Computer addiction is still a fairly new disorder that mental health professionals are studying. Excessive computer use is a problem that can have serious repercussions in both the user and those people around him. This research can provide answers with regards to the problem, and helps to find a way on how to stop or prevent this addiction. With the gathered information, this research will possibly find solutions on the questions related to the research, (Effects of computer addiction on the academic Performance of students) Related Literature Most of our youth and students today are fond of going into internet shop to use computer, without knowledge of their parents what they are up to. They will ask money from their parents telling that they have something to search in the internet for their project or assignments, although others do so, but there are some who just make it as an alibi so that they can compete skills with their peers through playing games online like for example war craft, battle realms, DOTA etc. Since time named the microcomputer their â€Å"Man of the Year† in 1983 there has been a continued drive for public school teachers to become computer literate. A nationwide study concluded that although teachers have increased computer availability in their classrooms, they are not integrating computers into the standard curricula. The present study examined â€Å"technophobia† as an explanation for low levels of computer utilization. Elementary teachers, secondary science teachers and secondary humanities teachers in 54 schools across five urban school districts completed three measures of technophobia and a measure of demographic characteristics, computer/technology experience, computer availability, and current computer use. Results indicated that: (1) computers are available at all schools, but are not being used by many teachers; (2) many teachers are technophobic, particularly elementary teachers and secondary humanities teachers; (3) teachers are most worried about dealing with the actual computer machinery in their classroom, about computer errors, and about learning to use computers. Many people do not know how, or even when computers were first made. Even before the first electronic computers were made, many people believe that computers started with the abacus, a simple counting device. The abacus is believed to have been built in Babylon in the fourth century B. C. The First Generation of computers started in the very late 1930s. These computers were grotesquely slow, colossal in size, created much heat, used hundreds of kilowatts of power, and were about as reliable as a used up match. As time went on, these computers evolved from using vacuum tubes to transistors. Transistors mark the beginning of the Second Generation of computers in 1947.