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Keywords = unrealized gains or losses

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24 pages, 2014 KB  
Article
A Behavioral Theory of the Income-Oriented Investors: Evidence from Japanese Life Insurance Companies
by Hiroyuki Sasaki
J. Risk Financial Manag. 2025, 18(7), 364; https://doi.org/10.3390/jrfm18070364 - 1 Jul 2025
Viewed by 925
Abstract
This study investigates the yield-seeking behavior of income-oriented institutional investors, who are essential players in financial markets. While external pressures compelling firms to “reach for yield” are well-documented, the firm-level behavioral drivers underlying this phenomenon remain largely underexplored. Drawing on the behavioral theory [...] Read more.
This study investigates the yield-seeking behavior of income-oriented institutional investors, who are essential players in financial markets. While external pressures compelling firms to “reach for yield” are well-documented, the firm-level behavioral drivers underlying this phenomenon remain largely underexplored. Drawing on the behavioral theory of the firm, this study argues that an investor’s performance relative to their social aspiration level (the peer average) influences their yield-seeking decisions, and that this effect is moderated by “portfolio slack,” defined as unrealized gains or losses. To test this theory in the context of persistent low-yield pressure, this study constructs and analyzes a panel dataset of Japanese life insurance companies from 2000 to 2019. The analysis reveals that these investors increase their portfolio income yield after underperforming their peers and decrease it after outperforming. Furthermore, greater portfolio slack amplifies yield increases after underperformance and mitigates yield decreases after outperformance. In contrast, organizational slack primarily mitigates yield reductions after outperformance. This research extends the behavioral theory of the firm to the asset management context by identifying distinct performance feedback responses and proposing portfolio slack as an important analytical construct, thereby offering key insights for investment managers and financial regulators. Full article
(This article belongs to the Section Financial Markets)
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17 pages, 605 KB  
Article
Other Comprehensive Income: Do Nonprofessional Investors Value It as Much as Net Income?
by Ning Du and Ray Whittington
J. Risk Financial Manag. 2024, 17(11), 508; https://doi.org/10.3390/jrfm17110508 - 14 Nov 2024
Viewed by 2273
Abstract
This study examines how investors incorporate unrealized gains or losses reported in Other Comprehensive Income (OCI) into their investment judgments. Since unrealized gains or losses can be presented in either OCI or net income—gains from trading securities are included in net income, while [...] Read more.
This study examines how investors incorporate unrealized gains or losses reported in Other Comprehensive Income (OCI) into their investment judgments. Since unrealized gains or losses can be presented in either OCI or net income—gains from trading securities are included in net income, while those from available-for-sale securities are reported in OCI (ASC 320 and ASC 851)—it raises the question of whether OCI items are perceived as equally significant as net income items. To explore this, we conducted a 2 × 2 experiment with 240 individual investors, manipulating the presentation of unrealized gains or losses in either net income or OCI. Our findings reveal that unrealized gains are valued significantly lower when presented in OCI compared to net income, indicating that investors see OCI-reported gains as less relevant. However, for unrealized losses, the incorporation degree remained consistent across both presentations, reflecting a general aversion to unrealized losses regardless of how they are reported. Full article
(This article belongs to the Special Issue Advances in Accounting & Auditing Research)
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