 Currency magnitude and cognitive biases: Evidence of dividend rounding in Latin AmericaAugusto Castillo, German Rubio and Keith Jakob The North American Journal of Economics and Finance, 2020, vol. 51, issue C Abstract: In this article, we contribute to a branch of literature that examines cognitive biases that influence corporate decision making. We examine whether Latin American firms round their dividend distributions based on a managerial heaping heuristic. Heaping is a bias to round numbers even though precise results are desired. Our study focuses on dividends in four Latin American markets with starkly different currency magnitudes. We hypothesize and report that currency magnitude significantly influences the characteristics of rounding observed in the dividend data. From 1990 through 2018, we report that 57% of Colombian dividends are heaped to a one decimal place or less of the local currency. The proportions are 49% for Chilean dividends, but only 11% for Mexican dividends and 2% for Brazilian dividends respectively. Consistent with the prior literature, we also report that the likelihood of heaping of dividends in each country is significantly related to both dividend size, and to the level of information uncertainty faced by firm management. Keywords: Heaping; Dividends; Currency order of magnitude; Dividend size (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:51:y:2020:i:c:s1062940819301895 DOI: 10.1016/j.najef.2019.101101 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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