IMPACT OF BEHAVIOURAL BIASES ON WORKING CAPITAL MANAGEMENT OF MANAUFACTRING SECTOR OF PAKISTAN: A NON PARAMETRIC INVESTIGATION APPROACH

The current study aims to investigate the relationship of overconfidence bias, loss aversion bias, self-serving bias and anchoring bias with working capital management. The study used questionnaire and acquired primary data from the companies of manufacturing sector of Pakistan, are selected as sample of the study. The study used connivance sampling technique for data acquisition. Moreover, descriptive statistics are applied by using item wise technique and nonparametric techniques are also applied that supported results with historic investigations and have found significant relationship of biases with working capital management.


INTRODUCTION
Behavioral finance is the study that deals with irrational attitude and cognition of the financial stakeholders regarding financial decisions. And it is the combination of conventional finance with psychological theories. However, it become the plethora of behavioral finance that elaborates how modern finance is working and is affected by investors decisions The idea of behavioral finance became popular in 1990. And it is started to analyze investor decision in the kind of market returns and stock price shuffulement. Therefore, cognitive factors and individual attitude are viewed as influencing factors to originate change in market price from their fundamental value. However, various studies have found significant results of investor attitude towards decision making. Moreover, it is commonly understood that humans are investor's, money exchangers, brokers, financial analysts and working capital managers have developed principles of all financial domains including corporate and strategic finance domain. The strategic and corporate fiancé focuses on investing, financing and risk management decisions. Thus, these are considered as key responsibilities of finance managers. Whereas, finance mangers controls other financial matters including working capital management as well. It is also observed that various international companies considered importance of working capital and appointed the working capital managers specifically. Thus, it has shown strong harmony among corporate finance and behavioral finance domain. And these both paradigms are formally observed jointly by few researchers now days. As Ramiah et al. (2014) has recently observed working capital managers biases impact on working capital management and have found significant results by using prospect theory. Therefore, objective of the current study is to explore the nature of relationship of overconfidence bias, loss aversion bias, self-serving bias and anchoring bias with working capital management. Moreover, such nature of relationship of two different paradigms is less investigated specifically in Asian context regarding working capital management through primary data. Therefore, objective of the study is also to cover the gap by incorporating such relationship in Pakistani context through scales as well. The study will reveal importance of working capital management in the cognitive eyes of Pakistani corporate managers. And such study has key implications regarding theorists and corporate practitioners including researchers. Moreover, study will reveal the new link of literature for behavioral finance scholars and will provide new gaps for investigations. The scheme of the paper is that section two explains literature review and comprehends hypothesis of the study, section three explains the methodology of the study, section four elaborates the results and analyses section and section four concludes the study findings.

LITRATURE REVIEW
A corporate manager behaves more confidently than normal levels are pronounced as overconfident and such causes more hurdles in business. In other words overconfidence is an unwarranted faith on some other ability, personality, judgment, cognitive ability specifically regarding decision making. Peitarinen, (2014). Farsi et al., (2014) argued that overconfidence behavior is a phenomenon that leads business managers towards unprepared decisions, ultimately a financial collapse.
Such financial collapses are also leaded by other behaviors like self -serving bias. It is behavioral error where an individual poses him/her on a favorable side when negative outcomes are originated. Such behavioral errors are posed by social errors some time (McCullogh and Willoughby, 2009). Therefore, self-serving bias phenomena is found significant with various kind of decision making because of its behavioral aspect in nature (McAllister, 1996).
Such self-serving behavior experiences an individual working in financial plethora and he/she moves pessimistically in future trading's and decision making. Such risk averse approach leads and traps individual in a behavior named as loss aversion behavior. Loss aversion bias is a behavior where individuals or groups strongly behave to risk aversion in context to loss aversion. Such loss aversion is fully supported by prospect theory (Genesove and Mayer, 2001). While, Chen & Davis (2014) concluded in their study that in both streams individuals commonly behaves loss averse and it is self-acquainted more than learned. Moreover & Rafuse (1996) have found significant results of loss aversion by using the rational choice theory with decision making.
In normal cases such decisions are originated by individuals past experience named as anchoring bias. Thus, anchored bias is the behavior where individuals rely on the past information and experience named as anchored behavior. Champbell & Sharp (2009) has found significant results in their study regarding anchored behavior with decision making by dividing anchored behavior into two categories. Moreover, Yang, Zhang & Zhou, (2012) have found similar results in their study.
The current study aims to investigate such behavioral biases impact on working capital management. The amount of funds that is planned and budgeted to meet current operations is named as working capital management. Such working capital is planned by corporate financial managers or working capital managers by their decisions and such decisions are normally trapped by such biased behaviors that are explained above. Therefore, Glaser & Weber, (2007) argued that such all psychological errors shuffles and imbalance financial and economic matters by self-esteem and self-behavior including working capital management. Sindhu & Waris, (2014) supported that such behavioral biases are directly correlated with decisions and stock market trading in Pakistan. Thus, Ramiah et al., (2014) also supported this argument and concluded that these behavioral biases are strongly correlated with working capital management. So the study hypotheses are, H1: There is positive relationship between overconfidence bias and working capital management H2: There is positive relationship between loss aversion bias and working capital management H3: There is positive relationship between anchoring bias and working capital management H4: There is positive relationship self-serving bias and working capital management

RESEARCH METHODOLOGY
The current study aims to investigate the relationship among behavioral heuristics and working capital management. Thus, the population of the study is listed business sectors of Pakistan listed at Karachi Stock Exchange (K.S.E). While, sample of the study is manufacturing sector of

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Volume 55 Pakistan that consist of various sub sectors. The current study has acquired data from a brief questionnaire adopted by the study of Ramiah et al., (2012 In item wise descriptive statistics each variable of the study is explained on the base of their scales items. Two categories of the scale lies in current study questionnaire i-e main question and sub question (Item/ Part of question). These both domains are used separately to acquire data by respondents and are also tested separately.
In The table 4.2 explains the item wise descriptive statistics of loss aversion bias (LAB). The loss aversion bias consists of one question that has two parts (A) and (B). Thus, the mean value of question one (A) part is 3.3246 and the (B) part is 1.5439. Moreover, the standard deviation value of (A) part is 1.81681 and the (B) part is 1.23475 respectively.   The table 4.6 revealed the results of overconfidence bias and overconfidence bias is explained by three respective questions OB1, OB2 and OB3 that are based on likert scale. Each factor of the scale is measured on 0-5. Here 01 and 02 are used as high percentage, 03 as neutral and 04 & 05 are measured as low percentage. Thus, T. test is used for the purpose to check rating is different from both percentage i-e. High and low or not. All questions are found significant at 0.95% confidence interval.
Thus, OB1 mean has 1.3860, OB2 mean has 1.2895, OB3 has mean value 2.0526 that is far greater than both questions mean value because of it cross nature of question with respect to question 01 (OB1) and question 02 (OB2). Median and mode values are similar of all questions. The t value is 18.666, 20.019 and 13.549 respectively. The t value of OB3 is less than both first questions because of its opposite nature of paradoxes. Moreover, response by respondents is prone as high in favor of overconfidence behavior. And comparatively percentages are high than low percentages as reported in table 01. Thus, results concluded that respondents are found as significantly overconfident. Loss aversion bias is measured and is reported by two parts of a similar question as reported in scale. Two parts of the questions are named as LAB1A & LAB1B respectively. In table 02 results are also obtained by comparing 1-2 and 4-5 factors with factor 03 -neutral factor. Thus, a result are prone as significant and lies more in high percentage as compare to low. The mean value of LAB1A is 3.3246 and LAB1B mean value is 1.5439. While, median values are 4.0000 and 1.0000 respectively. And there is similar change in the values of mode as 5.00 & 1.00 as like median and mean. So results concluded that corporate finance managers are also found as loss averse. Anchored bias is measured by four representative questions AB1, AB2, AB3 & AB4 respectively. Thus, the paradox of anchored bias question is uniform. Therefore, mean and median and mode values are increasing gradually as per questions. Moreover, t test is applied to check in relationship deviation from neutral behavior. Results prone higher percentage figures as compare to low. Low percentage is denominated and coded as 4-5 combined and higher percentages is coded by combining 1-2. As results shown higher figures in percentage and significant as reported in table 03 it is concluded by results that finance managers are also anchored. Self-serving bias is measured and it reported by three questions i-e SSB1, SSB2 and SSB3 respectively. SSB1 contains on two parts (A) and (B). SSB2 contains on three parts (A), (B) and (C). And SSB3 contains on three parts (A), (B) and (C) respectively. The nature of questions paradox is similar and uniform in nature represented by mean that is gradually increasing. Median is variant but then similar in figures and mode is constant due to paradox nature. Thus, the higher values are prone in higher percentages as compare to low values in lower percentages and are statistically significant on the base on significance level at 0.95%. So the results concluded that selfserving behavior is found significant because finance managers of corporate sector are responding more as per factor and two i-e. Strongly Agree and Agree that represents their self-serving behavior. The table 4.9 explains the relationship of independent variables with dependent variable. The independent variables are overconfidence bias (OB), loss aversion bias (LAB), anchoring bias (AB) and self-serving bias (SSB) and dependent variable is working capital management (WCM). Comparatively mean value is cyclical that moves up and down of independent variable with respect to dependent variable relation. It is because of nature of scale where overconfidence is measured by three questions, loss aversion bias is measured by two factors, self-serving bias has 09 factors and anchoring bias has four factors. Thus, variation of paradoxes produced vibrational mean values. Therefore, uniform variations are found in t. test values.
Thus, mean value of OB with working capital is 0.55540, LAB with working capital 0.30305 that become slightly low because of single factor, AB and WCM mean value is 0.46094 that rose up as compare to loss aversion bias because of multiple factors and SSB with working capital mean value is 0.42721 that also produced near to similar value as like anchoring bias mean. Thus, in current investigation study scale revealed pro-vital role in results section and data interpretation and has shuffled results dramatically.
Moreover, table 04 revealed significant relation of all independent variables with dependent variable. Because significance value of each value is found significant at 0.95% confidence interval. Moreover, comparatively sample of the study concluded that their response is found more biased than rationale response. Thus, upper percentages are indicating that 69.515% sample of study is agreed as overconfident that is higher than being disagreed i-e. 0.41513, loss aversion is 0.45472 that is greater than 0.13157 not being loss averse, sample is also more anchored comparatively from not being anchored because upper percentage is higher than lower (0.58609>0.33579) and finally sample is also prone as self-serving more because 0.56223 is greater than 0.29219 that represents as not being self -serving. Hence, study supported historic investigations and sample of the study is found biased as overconfidently, loss aversion, anchored and self-serving towards working capital selection, execution and during its management.

CONCLUSION
The study planned to investigate such relationship of biases with working capital management and have found significant results of anchoring bias, loss aversion bias, self-serving bias, and overconfidence bias with working capital management. The forecasted relationship is matched with observed relationship that there is positive relationship of biases with working capital management. Thus, all hypothesis of the study are accepted and study has supported historic findings.