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Abstract
This paper assumes that managers, investors, or both behave irrationally. In addition,
even though scholars have investigated behavioral irrationality from three angles,
investor sentiment, investor biases and managerial biases, we focus on the
relationship between one of the managerial biases, overconfidence and dividend
policy. Previous research investigating the relationship between overconfidence and
financial decisions has studied investment, financing decisions and firm values.
However, there are only a few exceptions to examine how a managerial emotional
bias (optimism, loss aversion and overconfidence) affects dividend policies. This
stream of research contends whether to distribute dividends or not depends on how
managers perceive of the company’s future. We will use Bayesian network method to
examine this relation. Emotional bias has been measured by means of a questionnaire
comprising several items. As for the selected sample, it has been composed of some
100 Tunisian executives. Our results have revealed that leader affected by behavioral
biases (optimism, loss aversion, and overconfidence) adjusts its dividend policy
choices based on their ability to assess alternatives (optimism and overconfidence)
and risk perception (loss aversion) to create of shareholder value and ensure its place
at the head of the management team.