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The purpose of this study is to illustrate the potentially detrimental effects on audit decision-making of certain judgmental heuristics, which can lead to systematic judgmental biases. This paper provides background on the heuristics and biases approaches to decision-making to increase auditors' awareness of the anchoring and adjustment effects affecting audit judgments adversely.

This study reports the results of an experimental research design analyzing the audit judgment of 85 auditors in Switzerland.

Based on the results of the experiment, the results indicate evidence on the existence of the anchoring and adjustment heuristic in Swiss audit judgments. The authors could identify an influence of the audit company size, the auditors' experience and the auditors' knowledge about behaviorism and anchor heuristic with regard to the anchoring and adjustment effect on audit judgment.

The experimental tasks were relatively simple abstractions from the more complex analytical review situations faced by practicing auditors. Due to the small sample size, the authors cannot ensure representativeness of the results.

Professional judgment is a skill that auditor acquires overtime, combined with experience and knowledge, that allows him to achieve reasonable judgments, being independent of other opinions and free from material biases in a given circumstance. Our results show that auditors who are aware of biases and heuristics are less prone to judgment biases.

This paper is the first to analyze the impact of auditors' explicit experience and knowledge about behaviorism and anchor heuristic on the anchoring and adjustment effect on audit judgment. Through a stronger awareness of cognitive biases, a professional skepticism can be enhanced.

Research in both psychology and accounting indicates that humans, in making decisions, resort to using decision strategies known as heuristics. One heuristic of particular interest in the field of accounting is that of anchoring and adjustment. Empirical research has shown that subjects will sometimes bias judgements towards the anchor even in situations where the anchor is of little value or is irrelevant. Explains that the presence of a primary or recency effect in the context of the anchoring and adjustment heuristic may be the existence of an “internal anchor”. Combining these theories, hypothesizes that auditors would use their initial mindset as an anchor. A laboratory experiment indicated that auditors did employ the anchoring and adjustment heuristic; they did have a negative internal anchor; and the inertia effect could be used to predict whether a primary or recency effect would be present in a particular likelihood estimation. The results gave strong support for the idea that auditors place over‐reliance on negative information. However, the results indicated that students did not have an internal anchor, did not employ the anchoring and adjustment heuristic and that the inertia effect was not useful in predicting whether a primary or recency effect would be present in a particular likelihood estimation.

The purpose of this paper is to analyse consumer buying behaviour in the Japanese rice wine, also known as sake market.

The study applies a novel qualitative and quantitative analytical methodology to an off-license channel in Japan. The methodology involves the use of anchoring-and-adjustment theory and simulation to a large set of point of sale data. The selection of the brands used for the study are more than 230 brands and more than 150 sake breweries.

Age and gender are important factors determining recurrent patterns of purchasing behaviour. Small size packaging, e.g. one cup, has the highest volume in sales, for example, convenience shopping, but it depends on exogenous factors, e.g. summer season or festive events.

Limitations are related with the lack of specific personal data from consumers that impedes to test behavioural attitudes driving loyalty to brands. Anchoring-and-adjustment theory can be a valid approach to evaluate large longitudinal data sets of purchasing behaviour.

Results indicate that fragmented markets tend to over-expand the assortment affecting volume stability. However, this dynamics is difficult to avoid when all participants are engaged in this behaviour and the market is strongly segmented by age and gender.

The paper contributes to the body of knowledge of buyer behaviour in relation to purchasing and consumption for other types of wine. It is the first application in alcoholic beverages of anchor-and-adjustment theory.

The purpose of this paper is to determine whether anchoring and adjustment as heuristic-driven bias and herding behaviour influences listed property fund managers in South Africa’s property investment decisions. The study contributes to the understanding of the influence of heuristic-driven bias and herding behaviour on property investment decisions made in a highly volatile environment.

This study is focused on the subject field of behavioural finance and follows a survey-based design. A questionnaire was finalised after completion of the pilot study and was sent via e-mail to fund managers of all South African-based property funds listed on the Johannesburg Securities Exchange. Non-parametric statistical measures were used.

Consistency with other studies suggests that anchoring and adjustment may exist in the decisions made by listed property fund managers. However, fund managers tend to not adjust to new information due to the current socio-political environment in South Africa rather than a lack of understanding of the new information.

It is recommended that investors form developed and emerging economies take notice of the highly volatile circumstances in which property fund managers in an emerging economy such as South Africa have to make investment decisions. The probability of missed gains as a result of conservative investment strategies may have an impact on future returns.

This study enhanced the understanding of the role that heuristic-driven bias plays in the South African property industry and more importantly, it went some way towards enhancing understanding of behavioural aspects and their influence on property investment decision making in an emerging market.

The purpose of this paper is to detect quantitatively the existence of anchoring bias among financial analysts on the Tunisian stock market. Both non-parametric and parametric methods are used.

Two studies have been conducted over the period 2010–2014. A first analysis is non-parametric, based on observations of the sign taking by the surprise of result announcement according to the evolution of earning per share (EPS). A second analysis uses simple and multiple linear regression methods to quantify the anchor bias.

Non-parametric results show that in the majority of cases, the earning per share variations are followed by unexpected earnings surprises of the same direction, which verify the hypothesis of an anchoring bias of financial analysts to the past benefits. Parametric results confirm these first findings by testing different psychological anchors’ variables. Financial analysts are found to remain anchored to the previous benefits and carry out insufficient adjustments following the announcement of the results by the companies. There is also a tendency for an over/under-reaction in changes in forecasts. Analysts’ behavior is asymmetrical depending on the sign of the forecast changes: an over-reaction for positive prediction changes and a negative reaction for negative prediction changes.

The evidence provided in this paper largely validates the assumptions derived from the behavioral theory particularly the lessons learned by Kaestner (2005) and Amir and Ganzach (1998). The authors conclude that financial analysts on the Tunisian stock market suffer from anchoring, optimism, over and under-reaction biases when announcing the earnings.

This paper aims to clarify the mechanism by which heuristics influences the investment decisions of individual investors, actively trading on the Pakistan Stock Exchange (PSX), and the perceived efficiency of the market. Most studies focus on well-developed financial markets and very little is known about investors’ behaviour in less developed financial markets or emerging markets. The present study contributes to filling this gap in the literature.

Investors’ heuristic biases have been measured using a questionnaire, containing numerous items, including indicators of speculators, investment decisions and perceived market efficiency variables. The sample consists of 143 investors trading on the PSX. A convenient, purposively sampling technique was used for data collection. To examine the relationship between heuristic biases, investment decisions and perceived market efficiency, hypotheses were tested by using correlation and regression analysis.

The paper provides empirical insights into the relationship of heuristic biases, investment decisions and perceived market efficiency. The results suggest that heuristic biases (overconfidence, representativeness, availability and anchoring) have a markedly negative impact on investment decisions made by individual investors actively trading on the PSX and on perceived market efficiency.

The primary limitation of the empirical review is the tiny size of the sample. A larger sample would have given more trustworthy results and could have empowered a more extensive scope of investigation.

The paper encourages investors to avoid relying on heuristics or their feelings when making investments. It provides awareness and understanding of heuristic biases in investment management, which could be very useful for decision makers and professionals in financial institutions, such as portfolio managers and traders in commercial banks, investment banks and mutual funds. This paper helps investors to select better investment tools and avoid repeating expensive errors, which occur due to heuristic biases. They can improve their performance by recognizing their biases and errors of judgment, to which we are all prone, resulting in a more efficient market. So, it is necessary to focus on a specific investment strategy to control “mental mistakes” by investors, due to heuristic biases.

The current study is the first of its kind, focusing on the link between heuristics, individual investment decisions and perceived market efficiency within the specific context of Pakistan.

This paper aims to revisit the issue of anchoring effects in real estate markets to consider the current dual-processing theory of mind.

The effects of high and low anchors in a price estimation task are, thus, explained by both Systems 1 and 2 as these play a key role in the guess of the “correct” list price. The authors also take into account the mediation of overconfidence in the estimates and how confidence relates to cognitive ability. Moreover, the authors nuance the field experiment by considering the decisions taken by professional real estate agents and amateur students alike because experts are expected to be less prone to cognitive biases.

The large anchoring index of 67 per cent found for the real estate agents suggests these professionals make their judgment unconsciously by priming (and thus, using their System 1), despite being overconfident. In contrast, an even larger anchoring index for the undergraduates (86 per cent) was found, as expected for nonexperts. However, the authors suggest the students’ judgments use their System 2 because they are clueless in their non-anchored estimates and, as result, consider the list prices as a heuristic to deliberately anchor and adjust.

Anchoring effects in real estate markets have not been approached so far by the dual-processing theory of mind.

Heuristics are used in the judgment and decision-making process of bank employees; however, discussions and research on the type or range of judgmental heuristics are very difficult to find throughout the world. In light of this, the purpose of this paper is to empirically analyze what types of heuristics are used in bank employees’ judgment and decision-making processes and the extent to which those types of heuristics prevent rational decision making due to the systematic biases they generate. In particular, this study aims to conduct empirical research based on various scenarios related to the banking industry.

To examine the heuristics in decision-making circumstances and the level of subsequent biases, the present study narrowed the scope of research to the three main types of heuristics introduced by Tversky and Kahneman (1974), namely, representativeness heuristics, availability heuristics and anchoring and adjustment heuristics. To analyze the bank employees’ decision making, this study specifically investigated the level of decision-making heuristics and the level of bias by focusing on these three types of heuristics. This study targeted bank employees who either sell financial products or are engaged in customer service work at a real/physical bank.

For representativeness heuristics, this study found bank employees’ judgment of probability was influenced by biases, such as insensitivity to prior probability, insensitivity to sample size, misconception of chance and insensitivity to predictability. Regarding availability heuristics, it found that bank employees judge the probability of events based on the ease of recalling an event instead of the actual frequency of the event, and so they fall prey to systematic biases. Finally, regarding anchoring and adjustment heuristics, this study found that employees fall prey to judgment biases as they judge the probability of conjunctive events and disjunctive events based on anchoring and insufficient adjustment.

Although people who are well-trained in statistics can avoid rudimentary errors, they fall prey to biased judgment at a similar level to those who are not properly trained in statistics when it comes to more complicated and ambiguous issues. It clearly indicates that it is risky to determine that financial experts would be more rational than the general public in making various judgments required in the policy-making process. To conclude, it is imperative to recognize the existence of heuristics-based systematic biases in the judgment and decision-making process and, furthermore, to reinforce the education and training system to improve bank employees’ rational choice and judgment ability.

The belief-adjustment model has been an integral part of accounting research in belief revision, especially in the examination of order effects. Hogarth and Einhorn ((1992) Cognitive Psychology, 24, 1–55) created the belief-adjustment model to serve as a theoretical framework for studying individuals’ decision-making processes. The model examines several aspects of decision-making, such as encoding, response mode, and task factors. The purpose of this chapter is to provide a comprehensive examination of the accounting studies that have used the theoretical framework of the belief-adjustment model in auditing, tax, and financial accounting contexts. Roberts’ ((1998) Journal of the American Taxation Association, 20, 78–121) model of tax accountants’ decision-making is used as a guideline to organize the research into categories. By using Roberts’ categorization, we can better sort out the mixed results of some prior studies and also expand the review to include a more comprehensive look at the model and its application to accounting. While many variables have been examined with respect to their effect on accounting professionals’ belief revisions, most studies examine them in isolation and do not consider the interaction effects that these variables may have. Our framework also identifies areas of the belief-adjustment model that need further research.

In uncertain environments, top managers may be inadvertently affected by the anchor information and make sticky decisions. The purpose of this paper is to examine how anchoring influences international merger and acquisition (M&A) equity decisions.

Based on the data of Chinese international M&A deals from 2007 to 2018, this paper uses the Tobit regression method to examine the anchoring effects on international M&A equity decisions.

The study shows that the acquiring firm's previous international M&A equity level as a self-generated anchor has a positive impact on the focal international M&A equity level. The local market's previous international M&A equity level as an externally provided anchor has a positive impact on the focal international M&A equity level. When there are self-generated anchors and externally provided anchors, the self-generated anchoring effect is stronger than the externally provided anchoring effect. The anchoring effect is stronger when the acquiring firm enters less stable host countries.

The acquirers in a single-country context may limit the generalizability of the results, and this study does not explicitly determine whether managers' decisions are unintentional or deliberate.

The study contributes to the discussion of equity-based foreign entry mode decisions by exploring anchoring behavior in strategic decisions. It provides an empirical investigation of the different anchoring effects and draws attention to the boundary conditions surrounding anchoring.