How Long Does It Last to Systematically Make Bad Decisions? An Agent-Based Application for Dividend Policy
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Department of Finance and CEFIMO, Faculty of Finance and Banking, Bucharest University of Economic Studies, 010374 Bucharest, Romania
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Department of Economic Informatics and Cybernetics, Faculty of Economic Cybernetics, Statistics and Informatics, Bucharest University of Economic Studies, 010552 Bucharest, Romania
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Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2019, 12(4), 167; https://doi.org/10.3390/jrfm12040167
Received: 4 October 2019
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Revised: 30 October 2019
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Accepted: 3 November 2019
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Published: 5 November 2019
(This article belongs to the Special Issue Corporate Finance)
Bad decisions have harmful effects on the quality of human life and an increase of their duration expands these undesirable effects. Systematic bad decisions related to dividend policy can affect the investors’ quality of life in the long-term. We propose an agent-based model for the estimation of the duration of systematically making bad decisions, with an application on dividend policy. We propose an algorithm that can be used in modelling the interaction between different classes of shareholders and for predicting this duration. We perform numerical simulations based on this model using NetLogo 6.0.4. We prove that, as a result of agents’ interaction, in some conditions, the duration of systematically making bad decisions can be very long: some numerical simulations suggest that, in some circumstances, this duration can significantly exceed the human lifetime. Additionally, in some conditions, the company can fail before the power is switched. This duration can increase dramatically if the shareholders have a great level of trust in the management’s decisions. As an implication, a greater concern for the quality of financial education, and more performant instruments for controlling the power’s decisions are required.
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Keywords:
agent-based models; decision-making; systematically making bad decisions; dividend policy; investors’ behavior; simulation
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MDPI and ACS Style
Dragotă, V.; Delcea, C. How Long Does It Last to Systematically Make Bad Decisions? An Agent-Based Application for Dividend Policy. J. Risk Financial Manag. 2019, 12, 167. https://doi.org/10.3390/jrfm12040167
AMA Style
Dragotă V, Delcea C. How Long Does It Last to Systematically Make Bad Decisions? An Agent-Based Application for Dividend Policy. Journal of Risk and Financial Management. 2019; 12(4):167. https://doi.org/10.3390/jrfm12040167
Chicago/Turabian StyleDragotă, Victor, and Camelia Delcea. 2019. "How Long Does It Last to Systematically Make Bad Decisions? An Agent-Based Application for Dividend Policy" Journal of Risk and Financial Management 12, no. 4: 167. https://doi.org/10.3390/jrfm12040167
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