Issues that Matter When Behavioral Finance Factors Drive the Largest Initial Public Offering in the Saudi Financial Market

Ali Shaddady and Mohammed Alsaggaf
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Ali Shaddady: Department of Finance, King Abdulaziz University, Jeddah, Saudi Arabia,
Mohammed Alsaggaf: Faculty of Applied Studies, Department of Business Administration, King Abdulaziz University, Jeddah, Saudi Arabia

International Journal of Economics and Financial Issues, 2020, vol. 10, issue 6, 106-117

Abstract: Behavioral financing is an emerging science and a relatively new area for academic research, leveraging investors irrational behavior. To a certain degree, most investment decisions are affected by investors biases and expectations, which do not follow rationality requirements. This study rigorously investigated a group of behavioral financial factors optimism, pessimism, overconfidence, herd behavior, and loyalty and firm characteristics, and then it examined whether and to what extent behavioral financial factors drive investors behaviors about the largest initial public offerings (IPOs). This study employed structural equation modelling and used a representative survey of 353 investors during the IPO of Saudi Aramco. The study found that the factors that stimulated investors in the Saudi market, especially during the Aramco IPO behavior decision, included behavioral finance factors, such as optimism, overconfidence, loyalty, and herd behavior, while firm characteristics failed to shape investors decisions during Aramco s IPO.

Keywords: behavioral financial; firm characteristics; initial public offering; optimism; herd behavior; overconfidence (search for similar items in EconPapers)
JEL-codes: G40 G41 (search for similar items in EconPapers)
Date: 2020
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