Papers by Rassoul Yazdipour, Ph.D.
Social Science Research Network, 2013
This draft presentation shares with the readers a critical and historical truth about the fast-em... more This draft presentation shares with the readers a critical and historical truth about the fast-emerging field of Behavioral Finance & Economics. The fact that the roots of Behavioral Finance & Economics can be easily traced back to the founding of Capitalism and Free Enterprise System and specifically to Adam Smith and his "other book", The Theory of Moral Sentiments (TMS). Sentiments, which was first published in 1759, went through six revisions in Smith's lifetime; including the last revision in 1790, the year of his death. For comparison, Wealth of Nations was published in 1776. I am certainly not the first to make such a claim as a 2010 JBF&E article by Vernon Smith and a 2005 JPE writing by Ashraf, Camerer, and Loewenstein made similar observations and Smith went even further and developed some testable propositions.
Social Science Research Network, 2015
With continued attacks by some short-sighted, value-destroying, highly secretive, and deep-pocket... more With continued attacks by some short-sighted, value-destroying, highly secretive, and deep-pocketed corporate raiders against many well managed and value-maximizing companies like Amgen and Allergan here in California, there is a need for further development and deployment of robust and unconventional legal strategies to counter and neutralize such attacks. Attacks that are not even zero-some games in our societies. They are effectively ransom-seeking assaults by face-less and community-less financiers that may not only lead to forced break ups and possibly eventual destruction of well-managed and resource-challenged companies; but they may also lead to destruction of whole communities. My main arguments against such takeover attempts draw upon well-established economic/financial theories and practices that could be used in defense strategies in the courts of law. One set of strategy involves real-life and trust-based versions of the otherwise non-functioning Principal-Agent theory; another set involves newly developed Behavioral-Finance-based Value/Risk models and strategies. The financing strategy of choice for all such cases would be the growing Litigation Finance vehicle.
University Microfilms International eBooks, 1987
The Journal of Entrepreneurial Finance, Dec 1, 2001
This paper attempts to extend the Certification Paradigm-mainly used in the literature as an expl... more This paper attempts to extend the Certification Paradigm-mainly used in the literature as an explanation for IPO underpricings-to provide guidelines to entrepreneurs in their efforts to secure funding for new ventures. After extending the model to cases of pre-venture-capital start-up firms, along with the practical implications that would follow, efforts are made to derive some testable hypotheses for further research on the topic.
While behavioral finance had its beginnings in the early 1970s, it has not yet been fully and sys... more While behavioral finance had its beginnings in the early 1970s, it has not yet been fully and systematically accepted into the finance curricula of higher education. Acceptance of the findings from psychological research and recent advances in neuroscience are now being fully integrated into a research framework that explains how managers and investors make decisions and why some if not all such decisions persistently deviate from those predicted by the Law of One Price and Expected Utility theory. More importantly, such frameworks also prescribe strategies to avoid costly mistakes caused by behavioral phenomena. This chapter makes the case that the time is right for higher education programs to develop and offer courses in behavioral finance. Such courses should be based upon a new and developing paradigm that has its roots mainly in the field of cognitive psychology with added enrichments from the field of neuroscience. The new descriptive paradigm avoids the normative approach of traditional theory; and instead, attempts to explain how managers and investors actually make decisions in real life and under conditions of uncertainty and risk. Effectively, our work in this chapter is entirely based on one single question that the proponents of the new descriptive paradigm would raise: As far as training future managers and investment professionals is concerned, can any finance department at any university claim being relevant and truthful to the profession and yet at the same time avoid teaching the working of financial and managerial markets in the real world? The relevant literature is reviewed, theoretical and empirical underpinnings for the new paradigm are presented; and finally, a sample syllabus and course schedule are provided and discussed as a bench mark for future course and program developers.
Springer eBooks, Oct 12, 2010
This chapter first argues that the literature on financial distress and failure prediction has to... more This chapter first argues that the literature on financial distress and failure prediction has totally ignored the cause of failure – managers and owner-managers as decision makers – and instead has almost exclusively focused on the effect of failure, the financial data. The chapter then provides a review of the current state of the failure prediction literature. Recent studies that focus on small and medium-sized enterprises (SMEs) are covered next. We arrive at the same conclusion that after 35 years of academic inquiry into bankruptcy prediction, and despite all the sophisticated models and methodologies used in studies of the effects of firm failure, there is “no academic consensus as to the most useful method for predicting corporate bankruptcy.” At the end, the chapter discusses how psychological phenomena and principles, also known as heuristics or mental shortcuts, might be utilized in building more powerful success/failure prediction models.
Strategic Change, Nov 1, 2009
Building upon new findings from the field of behavioral finance and economics, this article provi... more Building upon new findings from the field of behavioral finance and economics, this article provides fresh insights into how venture capitalists (VCs) and entrepreneurs perceive, experience, and deal with risk; and how they go about making decisions in their respective areas of venture creation, venture evaluation, venture growth, and investing. By helping VCs and entrepreneurs to be cognizant of the many psychological traps that continuously get turned on at and around decision‐making times, such findings would certainly help both parties to avoid committing costly mistakes in their businesses. Copyright © 2009 John Wiley & Sons, Ltd.
John Wiley & Sons, Inc. eBooks, Mar 1, 2014
An important challenge facing employees and societies is saving and investing sufficient funds fo... more An important challenge facing employees and societies is saving and investing sufficient funds for a comfortable retirement. Research shows that human financial decision-making behavior is not always rational and that public trust in the economy can be lost. Surprisingly, neither better disclosure of financial services and products nor education has had little discernible effect in motivating individuals to effectively plan and save for transitioning out of the workforce. The fields of cognitive psychology and neuroscience identify many behavioral obstacles individuals face in taking the needed steps to save and invest more for the future. A host of behavioral issues influence an individual’s decision making about retirement including biases, heuristics, framing, hyperbolic discounting, self-awareness, and self-control. The emerging works on trust also add to our understanding of the retirement planning system. Exploring these findings and strategies for mitigating financial decision-making errors can make a substantive contribution to achieving a more secure retirement.
I The Equity Market and Small Firm.- 1 The Valuation of Initial Public Offerings: The Small Firm ... more I The Equity Market and Small Firm.- 1 The Valuation of Initial Public Offerings: The Small Firm Case.- 2 Pricing Minority Discounts in Closely-held Corporations.- II Issues in Financing of Small Firms.- 3 Asset-Based Financing and the Determinants of Capital Structure in the Small Firm.- 4 An Empirical Analysis of Financing the Small Firm.- 5 Financial Capital Structure and Small Business Viability.- III Issues in Leveraged Buyouts, Franchising and Agency Relations.- 6 Are the Motivations for Leveraged Buyouts the Same for Large and Small Firms?.- 7 Financial Issues in Franchising.- 8 Optimum Management Contracting, Agency Problem and the Size of the Firm: A Background Analysis.- IV Financial Institutions and Small Business Financing.- 9 Risk and Return in Small Business Lending: The Case of Commercial Banks.- 10 The Impact of Financial Institution Regulatory Change on the Financing of Small Business.- V Appendix.- A. A Short Guide to the Available Research in the Field of Small Business Finance.- B. Available Financial Data Bases for Research on Small Business.- Biographical Sketches.
Social Science Research Network, Feb 10, 2014
An important challenge facing employees and societies is saving and investing sufficient funds fo... more An important challenge facing employees and societies is saving and investing sufficient funds for a comfortable retirement. Research shows that human financial decision-making behavior is not always rational and that public trust in the economy can be lost. Surprisingly, neither better disclosure of financial services and products nor education has had a discernible effect in motivating individuals to effectively plan and save for transitioning out of the workforce. The fields of cognitive psychology and neuroscience identify many behavioral obstacles individuals face in taking the needed steps to save and invest more for the future. A host of behavioral issues influence an individual’s decision-making about retirement including biases, heuristics, framing, hyperbolic discounting, self-awareness, and self-control. The emerging works on trust also add to understanding the retirement planning system. Exploring these findings and strategies for mitigating financial decision-making errors can make a substantive contribution to achieving a more secure retirement.
Small Business Economics, 1990
The objective of this paper is to conduct an empirical analysis of the risk-return relationships ... more The objective of this paper is to conduct an empirical analysis of the risk-return relationships in the formal venture capital market and compare such relationships with the trade-offs available through comparable investment vehicles. Based on ten years of market data, the performance of the venture capital companies (VCCs) is compared with that of the mutual funds as weil as the broad market index. Test results from our study show that on average the VCCs well outperformed the comparable mutual funds as weil as the market benchmark. The VCCs had the same level of risk as the high-growth mutual funds but yielded 9.5% more return on an annual basis. When ranked according to their performances, the VCCs occupied the top of the list.
Springer eBooks, Oct 12, 2010
Three central decisions in entrepreneurship and entrepreneurial financeentry/seed funding, financ... more Three central decisions in entrepreneurship and entrepreneurial financeentry/seed funding, financing/investment, and growth/exit-are discussed and case is made for applying the behavioral finance theories and concepts to better understand the involved decision processes, and consequently, to help improve the decisionmaking process for both entrepreneurs and venture capitalists. The behavioral finance approach is important because the traditional finance has remained silent on the first issue, and the Agency Theory (financial contracting), which is effectively the only theory that is applicable to issues in entrepreneurial finance, has produced mixed empirical results. (See for example Bitler et al. [Bitler MP, Moskowitz T J, Vissing-Jorgensen A (2009) Why do entrepreneurs hold large ownership shares? Testing agency theory using entrepreneur effort and wealth. Working Paper. Graduate School of Business, University of Chicago].
The Journal of Entrepreneurial Finance, Dec 1, 2010
In this article we first argue that researchers in the area of financial distress and failure can... more In this article we first argue that researchers in the area of financial distress and failure cannot ignore the human/managerial/decision-making side of the business and just focus on the business' operations side; as has been the case so far for almost all the research in the area. We then discuss how psychological phenomena and principles, known as heuristics or mental shortcuts, could be utilized in building more powerful success/failure prediction models especially for small and medium sized enterprises (SMEs).
Springer eBooks, 2011
, except for brief excerpts in connection with reviews or scholarly analysis. Use in connection w... more , except for brief excerpts in connection with reviews or scholarly analysis. Use in connection with any form of information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed is forbidden. The use in this publication of trade names, trademarks, service marks, and similar terms, even if they are not identified as such, is not to be taken as an expression of opinion as to whether or not they are subject to proprietary rights.
The Journal of Entrepreneurial Finance, Dec 1, 2009
Central questions in entrepreneurship and entrepreneurial finance are briefly discussed and case ... more Central questions in entrepreneurship and entrepreneurial finance are briefly discussed and case is made for the need for applying the behavioral finance theories and models to better understand the decision making dynamics that is involved at each stage of the entrepreneurial process. By dissecting a venture's total risk into a "Resident Risk" component and a "Behavioral Risk" component, attempt is made in this writing to introduce a preliminary risk model for evaluating key entrepreneurial decisions like the decision to launch and fund a new venture. Although the focus here is on individual decision making under highly uncertain entrepreneurial environments, but the suggested risk framework and the related discussions can be extended to decision making processes in all other uncertain environment.
For this specific piece, you may check out my Paper entitled "Operationalizing a Behavioral Finan... more For this specific piece, you may check out my Paper entitled "Operationalizing a Behavioral Finance Risk Model: A Theoretical and Empirical Framework"; the first few pages.
Sources: The Journal of Behavioral Finance & Economics 2 (2013); Rassoul Yazdipour, William P. Neace/.
Advances in Small Business Finance, 1991
This paper provides some basic ideas toward constructing an alternative framework for settling up... more This paper provides some basic ideas toward constructing an alternative framework for settling up the incurrence of agency costs in an enterprise. We first solve for the optimum amount of shirk consumption under the classical and managerial theories of the firm and then extend the analysis to situations where monitoring activities exist.
SSRN Electronic Journal, 2015
With continued attacks by some short-sighted, value-destroying, highly secretive, and deep-pocket... more With continued attacks by some short-sighted, value-destroying, highly secretive, and deep-pocketed corporate raiders against many well managed and value-maximizing companies like Amgen and Allergan here in California, there is a need for further development and deployment of robust and unconventional legal strategies to counter and neutralize such attacks. Attacks that are not even zero-some games in our societies. They are effectively ransom-seeking assaults by face-less and community-less financiers that may not only lead to forced break ups and possibly eventual destruction of well-managed and resource-challenged companies; but they may also lead to destruction of whole communities. My main arguments against such takeover attempts draw upon well-established economic/financial theories and practices that could be used in defense strategies in the courts of law. One set of strategy involves real-life and trust-based versions of the otherwise non-functioning Principal-Agent theory; another set involves newly developed Behavioral-Finance-based Value/Risk models and strategies. The financing strategy of choice for all such cases would be the growing Litigation Finance vehicle.
Chicago Booth MICRO: Behavioral Economics (Topic), 2013
To keep up with the rather fast-growing interest in the discipline of Behavioral Finance and Econ... more To keep up with the rather fast-growing interest in the discipline of Behavioral Finance and Economics caused in part by the new realities of the post-200S world, and the realities prevailing over three decades before and leading up to that year- there is a discernible need for the production of new generations of testable and yet more realistic models and theories as guides for financial and economic decision makers everywhere. The present work is one such attempt in that direction. This writing first improves upon a recently developed, and real-life-inspired, Behavioral Finance Risk Model (Yazdipour, 2011) and then offers a specific methodology for testing it.
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Papers by Rassoul Yazdipour, Ph.D.
Sources: The Journal of Behavioral Finance & Economics 2 (2013); Rassoul Yazdipour, William P. Neace/.
Sources: The Journal of Behavioral Finance & Economics 2 (2013); Rassoul Yazdipour, William P. Neace/.