TY - JOUR
T1 - Changing currencies and cognitive biases
T2 - evidence of the impact of introducing the Euro on dividend heaping in Europe
AU - Jakob, Keith
AU - Castillo, Augusto
AU - Rubio, German
N1 - Publisher Copyright:
© 2021 Informa UK Limited, trading as Taylor & Francis Group.
PY - 2021
Y1 - 2021
N2 - Heaping is defined as a cognitive bias to round numbers even if precise results are desired. This article targets on dividends in four key European markets (Germany, France, the UK, and Switzerland) over the 1981–2019 period. We hypothesize and report that the change of currency in Germany and France (they both adopted the Euro in January 1999) significantly influenced the characteristics of heaping observed in the dividends both in the short and in the long run. We also report that consistent with the prior literature, the probability of rounding of dividends in each country is significantly related to both information uncertainty and dividend size. In the UK and Switzerland heaping increases over time for the full 1981–2019 period for all designated rounding intervals. For Germany and France heaping increases for all rounding intervals during the 1981–1998 period, but the adoption of the Euro leads to a drastic reduction of heaping that lasts several years in both markets. In the long run, after the adoption of the Euro, the likelihood of heaping recovers for small rounding intervals, but remains well below the previous levels for larger rounding intervals.
AB - Heaping is defined as a cognitive bias to round numbers even if precise results are desired. This article targets on dividends in four key European markets (Germany, France, the UK, and Switzerland) over the 1981–2019 period. We hypothesize and report that the change of currency in Germany and France (they both adopted the Euro in January 1999) significantly influenced the characteristics of heaping observed in the dividends both in the short and in the long run. We also report that consistent with the prior literature, the probability of rounding of dividends in each country is significantly related to both information uncertainty and dividend size. In the UK and Switzerland heaping increases over time for the full 1981–2019 period for all designated rounding intervals. For Germany and France heaping increases for all rounding intervals during the 1981–1998 period, but the adoption of the Euro leads to a drastic reduction of heaping that lasts several years in both markets. In the long run, after the adoption of the Euro, the likelihood of heaping recovers for small rounding intervals, but remains well below the previous levels for larger rounding intervals.
KW - Heaping
KW - change of currency
KW - dividend size
KW - dividends
UR - http://www.scopus.com/inward/record.url?scp=85102260939&partnerID=8YFLogxK
U2 - 10.1080/1351847X.2021.1894196
DO - 10.1080/1351847X.2021.1894196
M3 - Article
AN - SCOPUS:85102260939
SN - 1351-847X
VL - 27
SP - 1438
EP - 1457
JO - European Journal of Finance
JF - European Journal of Finance
IS - 14
ER -