LOSS COST EFFECT: THE LOSS COST INFLUENCE IN THE INVESTMENT DECISION
DOI:
https://doi.org/10.11606/rco.v2i2.34707Keywords:
Sunk cost, Sunk cost effect, Investment, Behavioral FinancesAbstract
The decision whether to continue or not a project, or even the initiative of a new investment that requires constant resources allocation, should not be influenced by the past costs once these do not have any changes despite future decisions. When the decision is affected by investments made in the past, the "sunk cost effect" can be seen. However, according to the Modern Financial Theory, the loss costs are totally irrelevant for a future decision event. This study is an empirical research developed through a random usage of questionnaires given to graduate students of a university. It was tried to verify if the individuals really do not take importance to the loss cost when the decision is made. The Ç2 statistic test was used to show the significance of the different answers collected from students from different scenario, reinforcing this way, the idea that the loss cost effect on the resources allocation decision is not related to neither the disclosure nor the amount invested. According to the research and considering its limitations, the disclosure of the loss cost amount does not influence management decision. The result confirms previous studies in which the loss cost effect was observed.Downloads
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