INFLUENCE OF THE SELECTED BEHAVIOURAL BIASES ON INTERMEDIARIES IN INITIAL PUBLIC OFFERINGS MARKET: A SURVEY

Abstract: This study investigates the role of the selected behavioural biases on intermediaries’ decision making in the Initial Public Offerings (IPO) market. Based on the review of literature, four behavioural biases viz. ‘overconfidence’, ‘availability’, ‘representativeness’ and ‘anchoring’ are included in this study. A self-administered structured questionnaire is designed to measure the behavioural biases. Further, as a part of data analysis, non-parametric tests are used to examine the role of demographic factors on behavioural biases. Besides, behavioural biases are also ranked according to their prevalence among intermediaries. It has been found that intermediaries in the IPO market are prone to behavioural biases. In addition, demographic factors of intermediaries seem to influence behavioural biases. The ‘availability’ and ‘representativeness’ are found to be prominent behavioural biases that influence the intermediaries’ decision-making in the Indian IPO market. The findings can help intermediaries themselves, regulators and issuer firm to augment their understanding of the role of behavioural biases in decision making. A guided ‘nudge’ would help intermediaries to make their decision more rational. Besides, the findings would help policymakers in designing policies, training manuals, and course curricula to minimize intuition-based decision making.