A behavioural finance approach to working capital management

Bora Ramiah, V, Zhao, Y, Moosa, I and Graham, M 2014, 'A behavioural finance approach to working capital management', The European Journal of Finance, vol. online, pp. 1-26.

Document type: Journal Article
Collection: Journal Articles

Title A behavioural finance approach to working capital management
Author(s) Bora Ramiah, V
Zhao, Y
Moosa, I
Graham, M
Year 2014
Journal name The European Journal of Finance
Volume number online
Start page 1
End page 26
Total pages 26
Publisher Routledge
Abstract This paper documents the behaviour of corporate treasurers who are involved in the decision-making process in the areas of cash, inventory, accounts receivable, accounts payable and risk management during the global financial crisis. Using a survey questionnaire, we attempt to find out if working capital managers are prone to certain heuristic-driven biases, such as loss aversion, high confidence level, anchoring and self-serving biases. Our findings show that these professionals exhibit signs of behavioural biases. Although the biases lead to sub-optimal decisions in certain areas of working capital management (WCM), they can also be desirable attributes in other aspects of WCM. We propose a profile of a good working capital manager.
Subject Finance
Keyword(s) loss aversion
high confidence
self-serving bias
working capital management
DOI - identifier 10.1080/1351847X.2014.883549
Copyright notice © 2014 Taylor and Francis
ISSN 1351-847X
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