Changing currencies and cognitive biases: evidence of the impact of introducing the Euro on dividend heaping in Europe

Keith Jakob, Augusto Castillo and German Rubio

The European Journal of Finance, 2021, vol. 27, issue 14, 1438-1457

Abstract: Heaping is defined as a cognitive bias to round numbers even if precise results are desired. This article targets on dividends in four key European markets (Germany, France, the UK, and Switzerland) over the 1981–2019 period. We hypothesize and report that the change of currency in Germany and France (they both adopted the Euro in January 1999) significantly influenced the characteristics of heaping observed in the dividends both in the short and in the long run. We also report that consistent with the prior literature, the probability of rounding of dividends in each country is significantly related to both information uncertainty and dividend size. In the UK and Switzerland heaping increases over time for the full 1981–2019 period for all designated rounding intervals. For Germany and France heaping increases for all rounding intervals during the 1981–1998 period, but the adoption of the Euro leads to a drastic reduction of heaping that lasts several years in both markets. In the long run, after the adoption of the Euro, the likelihood of heaping recovers for small rounding intervals, but remains well below the previous levels for larger rounding intervals.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/1351847X.2021.1894196 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:eurjfi:v:27:y:2021:i:14:p:1438-1457

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/REJF20

DOI: 10.1080/1351847X.2021.1894196

Access Statistics for this article

The European Journal of Finance is currently edited by Chris Adcock

More articles in The European Journal of Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().