The Impact of Psychological Biases on Foreign Direct Investment (Fdi): The Case of Turkish Investors in Ethiopia

Journal of Research in Business

18 Pages Posted: 16 Jun 2020 Last revised: 20 Jul 2021

Date Written: May 22, 2020

Abstract

This paper aims to assess whether there is a behavioral bias of Turkish FDI investors in Ethiopia. Besides, it addresses the influence of firm size, investment duration, target customers and amount of investment on the behavioral variables. In order to do so, a survey was conducted on a sample of Turkish FDI investors in Ethiopia which tries to examine their cognitive psychological factors towards their investment decisions. The survey result was analyzed using factor analysis. The statistical findings confirm that some psychological anomalies such as representativeness, herding, regret aversion and mental accounting have been observed on Turkish FDI investors. The regression analysis shows that amount of investment of the firms significantly and positively affects herding, representativeness, regret aversion and mental accounting behaviors. Furthermore, duration of investment in Ethiopia affects their representativeness and mental accounting behavioral biases of investors positively.

Keywords: FDI, Behavioral bias, Turkish investors, Ethiopia, Factor analysis

JEL Classification: G40, F21

Suggested Citation

Ali, Abdu Seid, The Impact of Psychological Biases on Foreign Direct Investment (Fdi): The Case of Turkish Investors in Ethiopia (May 22, 2020). Journal of Research in Business, Available at SSRN: https://ssrn.com/abstract=3607868

Abdu Seid Ali (Contact Author)

Istanbul University ( email )

34459 Istanbul
Turkey

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
2
Abstract Views
72
PlumX Metrics