The effect of decision recommendations and approval expectations on directors’ decision control: an experimental investigation of anchoring effects

Gavin Nicholson () and Abdallah Bader Mahmoud Al-Zoubi ()
Additional contact information
Gavin Nicholson: Queensland University of Technology
Abdallah Bader Mahmoud Al-Zoubi: Hashemite University

Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, 2024, vol. 35, issue 3, No 4, 437-465

Abstract: Abstract This paper explores the psychological bias of anchoring in the context of corporate board decision-making by examining how an initial recommendation in simulated board papers can significantly influence decisions. Using a two-stage experimental design with both student and professional directors, the study demonstrates that anchoring affects both individual and group decision-making processes, irrespective of the decision-maker’s independence and information asymmetry present in the decision. This suggests that governance practices and information presentation may be an understudied mechanism for the control of agency costs. This research provides an extended replication of anchoring in corporate governance settings and highlights the need for a more nuanced consideration of board processes and decision-making biases when aiming to reduce agency costs. Normatively, it suggests a reconsideration of “one size fits all” governance recommendations.

Keywords: Boards of directors; Corporate governance; Board process; Group process; Cognitive bias; Anchoring (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s00187-024-00383-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jmgtco:v:35:y:2024:i:3:d:10.1007_s00187-024-00383-4

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/187

DOI: 10.1007/s00187-024-00383-4

Access Statistics for this article

Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung is currently edited by Thomas Günther

More articles in Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().