Looking beneath the surface

Kath Hall

Managerial Law, 2007, vol. 49, issue 3, 93-105

Abstract: Purpose - This article aims to discuss some of the most common ways in which business decisions are affected by cognitive biases. It focuses on the individual level of decision making and discusses how biases are deeply entrenched in the way that many decisions are made. It also discusses how flaws in decision making can escalate when executives are under pressure, over‐confident or part of a group. Design/methodology/approach - This article draws on a range of research in cognitive and organizational psychology to show the potential effect of cognitive biases on corporate decision making. Findings - The article argues that it is necessary to develop a better understanding of the effect of cognitive biases on executive decision making. Whilst research suggests that many aspects of decision‐making processes operate outside one's conscious awareness, it is suggested that these flaws may be easier to monitor and control when one is aware of their potential impact on corporate decisions. Originality/value - The paper demonstrates how a lack of awareness of the widespread operation of cognitive biases reduces the possibilities for good corporate governance.

Keywords: Corporate decision making; Cognitive psychology; Corporate governance (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:eme:mlppss:03090550710816500

DOI: 10.1108/03090550710816500

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