Journal of Behavioural Economics, Finance, Entrepreneurship, Accounting and Transport
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Journal of Behavioural Economics, Finance, Entrepreneurship, Accounting and Transport. 2020, 8(1), 7-13
DOI: 10.12691/jbe-8-1-2
Open AccessArticle

Cognitive Dissonance: An Evidence of How Self‐protective Distortions Undermine IPO Decision

Landry Simo1, 2, , Joseph Nzongang2 and Susana Alvaréz-Otero1

1Department of Business Administration, University of Oviedo, Oviedo, Spain

2Department of Finance and Accounting, University of Dschang, Dschang, Cameroon

Pub. Date: August 10, 2020

Cite this paper:
Landry Simo, Joseph Nzongang and Susana Alvaréz-Otero. Cognitive Dissonance: An Evidence of How Self‐protective Distortions Undermine IPO Decision. Journal of Behavioural Economics, Finance, Entrepreneurship, Accounting and Transport. 2020; 8(1):7-13. doi: 10.12691/jbe-8-1-2

Abstract

The purpose of this article is to identify the role of cognitive dissonance bias in managers’ IPO indeterminacy. In order to achieve our purpose, 67 CEOs and CFOs were indepthly interviewed, within the framework of a constructivist phenomenological analysis. Data were analyzed by means of content analysis method combined with a Probit/Logit Model. The results disclose that managers’ IPO indeterminacy is explained by cognitive dissonance. Demographic characteristics (such as gender, education level, field of study, firm size, age and experience) significantly moderate managers’ exposure to cognitive dissonance. In line with the results by Özen and Ersoy [1] and Hoechle et al. [2], we also outline that financial literacy reduces cognitive dissonance, hence fosters IPO likelihood. This study consists of a prime assessment of IPO decision through behavioral economics and the earliest empirical investigation of IPO decision through cognitive dissonance. Our managerial implications highlight the requirement of behavior-wise measures within IPO incentives policies.

Keywords:
cognitive dissonance Initial Public Offering CEO behavioral finance stock market

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