Psychological explanations for analysts' herding behavior: A study on the impact of information cascades and reputational concerns
Vol 9, Issue 11, 2024, Article identifier:
VIEWS - 121 (Abstract) 12 (PDF)
Abstract
This study investigates the influence of information cascades and reputational concerns on analysts' herding behavior in financial markets. Using a mixed-methods approach combining archival data analysis and surveys of 5,237 financial analysts covering S&P 500 companies from 2014 to 2023, we examine the interplay between these psychological factors. Our findings reveal that both information cascades and reputational concerns significantly impact herding behavior, with a notable synergistic effect when combined. Structural equation modeling demonstrates that information cascade strength positively correlates with herding behavior (β = 0.43, p < .001), partially mediated by perceived market consensus. Reputational concerns also show a strong positive association with herding (β = 0.51,
p < .001), moderated by career stage. Importantly, the interaction between information cascades and reputational concerns (β = 0.24, p < .001) suggests that their combined effect is greater than the sum of their individual impacts. This effect varies across analyst characteristics and market conditions, with stronger influences observed in small-cap stocks and high-volatility periods. Time-series analysis reveals dynamic fluctuations in these effects over time, responding to significant market events. These results contribute to the theoretical understanding of financial market behavior by integrating social influence and career concern perspectives, offering insights for both scholars and practitioners in an increasingly complex market landscape.
Keywords
Full Text:
PDFReferences
1. Ali, S.E.A., Lai, F.-W., & Hassan, R. (2020). Socio-Economic Factors On Sector-Wide Systematic Risk Of Information Security Breaches: Conceptual Framework. In Proceedings of the International Economics and Business Management Conference (pp. 502–512).
2. Ali, S.E.A., Lai, F.-W., Hassan, R., & Shad, M.K. (2021). The Long-Run Impact of Information Security Breach Announcements on Investors' Confidence: The Context of Efficient Market Hypothesis. Sustainability, 13, 1066.
3. Ali, R.F., Dominic, P., & Ali, K. (2020). Organizational governance, social bonds and information security policy compliance: A perspective towards oil and gas employees. Sustainability, 12, 8576.
4. Alfawaz, S., Nelson, K., & Mohannak, K. (2010). Information security culture: A behaviour compliance conceptual framework. In Proceedings of the Eighth Australasian Conference on Information Security-Volume 105 (pp. 47–55).
5. Aurigemma, S., & Mattson, T. (2017). Deterrence and punishment experience impacts on ISP compliance attitudes. Information & Computer Security, 25(4), 421–436.
6. Bélanger, F., Collignon, S., Enget, K., & Negangard, E. (2017). Determinants of early conformance with information security policies. Information & Management, 54(7), 887–901.
7. Bongiovanni, I. (2019). The least secure places in the universe? A systematic literature review on information security management in higher education. Computers & Security, 86, 350–357.
8. Boss, S., Galletta, D., Lowry, P.B., Moody, G.D., & Polak, P. (2015). What do systems users have to fear? Using fear appeals to engender threats and fear that motivate protective security behaviors. MIS Quarterly, 39(4), 837–864.
9. Chang, K.-C., & Seow, Y.M. (2019). Protective measures and security policy non-compliance intention: It vision conflict as a moderator. Journal of Organizational and End User Computing, 31(1), 1–21.
10. Connolly, L.Y., Lang, M., & Wall, D.S. (2019). Information Security Behavior: A Cross-Cultural Comparison of Irish and US Employees. Information Systems Management, 36(4), 306–322.
11. Corradini, I. (2020). Security: Human Nature and Behaviour. In Building a Cybersecurity Culture in Organizations (Vol. 1, pp. 23–47). Springer.
12. D'Arcy, J., & Greene, G. (2014). Security culture and the employment relationship as drivers of employees' security compliance. Information Management & Computer Security, 22(5), 474–489.
13. D'Arcy, J., & Herath, T. (2011). A review and analysis of deterrence theory in the IS security literature: Making sense of the disparate findings. European Journal of Information Systems, 20(6), 643–658.
14. D'Arcy, J., Herath, T., & Shoss, M.K. (2014). Understanding employee responses to stressful information security requirements: A coping perspective. Journal of Management Information Systems, 31(2), 285–318.
15. D'Arcy, J., & Lowry, P.B. (2019). Cognitive-affective drivers of employees' daily compliance with information security policies: A multilevel, longitudinal study. Information Systems Journal, 29(1), 43–69.
16. D'Arcy, J., & Teh, P.-L. (2019). Predicting employee information security policy compliance on a daily basis: The interplay of security-related stress, emotions, and neutralization. Information & Management, 56(7), 103–151.
17. Dinev, T., Goo, J., Hu, Q., & Nam, K. (2009). User behaviour towards protective information technologies: The role of national cultural differences. Information Systems Journal, 19(4), 391–412.
18. Doherty, N.F., & Tajuddin, S.T. (2018). Towards a user-centric theory of value-driven information security compliance. Information Technology & People, 31(2), 348–367.
19. Dong, K., Ali, R.F., Dominic, P., & Ali, S.E.A. (2021). The Effect of Organizational Information Security Climate on Information Security Policy Compliance: The Mediating Effect of Social Bonding towards Healthcare Nurses. Sustainability, 13, 2800.
20. Harnesk, D., & Lindström, J. (2011). Shaping security behaviour through discipline and agility: Implications for information security management. Information Management & Computer Security, 19(4), 262–276.
21. Herath, T., & Rao, H.R. (2009a). Protection motivation and deterrence: A framework for security policy compliance in organisations. European Journal of Information Systems, 18(2), 106–125.
22. Herath, T., & Rao, H.R. (2009b). Encouraging information security behaviors in organizations: Role of penalties, pressures and perceived effectiveness. Decision Support Systems, 47(2), 154–165.
23. Hina, S., & Dominic, P.D.D. (2018). Information security policies' compliance: A perspective for higher education institutions. Journal of Computer Information Systems, 60(3), 201–211.
24. Hsu, J.S.-C., Shih, S.-P., Hung, Y.W., & Lowry, P.B. (2015). The role of extra-role behaviors and social controls in information security policy effectiveness. Information Systems Research, 26(2), 282–300.
25. Hu, Q., Dinev, T., Hart, P., & Cooke, D. (2012). Managing employee compliance with information security policies: The critical role of top management and organizational culture. Decision Sciences, 43(4), 615–660.
26. Ifinedo, P. (2012). Understanding information systems security policy compliance: An integration of the theory of planned behavior and the protection motivation theory. Computers & Security, 31(1), 83–95.
27. Jai-Yeol, S. (2011). Out of fear or desire? Toward a better understanding of employees' motivation to follow IS security policies. Information & Management, 48(7), 296–302.
28. Kajtazi, M., Cavusoglu, H., Benbasat, I., & Haftor, D. (2018). Escalation of commitment as an antecedent to noncompliance with information security policy. Information & Computer Security, 26(2), 171–193.
29. Lankton, N.K., Stivason, C., & Gurung, A. (2019). Information protection behaviors: Morality and organizational criticality. Information & Computer Security, 27(4), 468–488.
30. Liu, C., Wang, N., & Liang, H. (2020). Motivating information security policy compliance: The critical role of supervisor-subordinate guanxi and organizational commitment. International Journal of Information Management, 54, 102152.
DOI: https://doi.org/10.59429/esp.v9i11.3162
(121 Abstract Views, 12 PDF Downloads)
Refbacks
- There are currently no refbacks.
Copyright (c) 2024 Senran Zhou
This work is licensed under a Creative Commons Attribution 4.0 International License.