Exploring decision-making: experimental observations on project selection and the impact of justification pressure

Christian Lukas, Max-Frederik Neubert and Jens Robert Schöndube ()
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Max-Frederik Neubert: Otto-von-Guericke-Universität Magdeburg
Jens Robert Schöndube: Leibniz Universität Hannover

Journal of Management & Governance, 2025, vol. 29, issue 3, No 5, 735-775

Abstract: Abstract In this experimental investigation, we explore the impact of justification on project choices. Introducing a novel element, we implement asymmetric payoff schemes commonly employed in business, signifying distinct payoff distributions for the firm (principal) and the manager (agent). The agent has to choose one project from two options that differ in their risk-return profiles. The outcomes of our experiment substantiate our hypothesis, indicating that a mandate for justification decreases the probability of agents selecting the project with higher risk and return. The degree of this reduction appears to hinge on the nature of justification. Increased profit shares for the agent or a project recommendation from the principal can partially counterbalance the distortion in the project choice.

Keywords: Agency; Behavioral accounting; Experiment; Incentives; Justification; Project selection (search for similar items in EconPapers)
JEL-codes: C72 C91 D81 M40 M52 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10997-024-09717-9

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