Transparency and empowerment in an investment environment

Kiridaran Kanagaretnam, Stuart Mestelman, S.M. Khalid Nainar and Mohamed Shehata

Journal of Business Research, 2014, vol. 67, issue 9, 2030-2038

Abstract: In a laboratory-controlled environment we provide experimental evidence on the effects of transparency (complete over incomplete information) and empowerment on trust and trustworthiness. We implement a simple version of the standard two-person investment game in a repeated game context with multiple treatments under two information environments. We find that when principals are empowered by being able to penalize agents who may not act in a way the principal believes is in the principal's best interest, the level of trust and investment increases over that which is realized in the absence of empowerment regardless of the degree of transparency. In transparent environments the effect of empowerment is about the same regardless of whether empowerment is introduced or removed. However, in opaque environments, the loss of empowerment has a substantially greater negative effect on trust than the positive effect associated with the introduction of empowerment.

Keywords: Transparency; Empowerment; Disempowerment; Trust; Reciprocity; Say-on-pay (search for similar items in EconPapers)
JEL-codes: C7 C9 D3 D8 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:67:y:2014:i:9:p:2030-2038

DOI: 10.1016/j.jbusres.2013.10.007

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