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
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: Suggested Citation