The disposition effect refers to the tendency of investors to sell winners too early and hold on to losers too long, which is one of the most documented and robust decision biases. However, few studies have looked beyond demographic and social factors on the disposition effect. The current study investigated the association between financial self-efficacy (one’s belief about their personal capability in ultimate financial goals achieving), versatile cognitive style (an individual’s capability in deploying the experiential or rational mode in ways (...) that are contextually appropriate), and the disposition effect. A total of 285 employees from finance-related business completed anonymous questionnaires regarding financial self-efficacy, rational-experiential inventory, and the disposition effect. Our findings revealed that financial self-efficacy was significantly and positively associated with versatile cognitive style and the disposition effect. Further, versatile cognitive style partially mediated the relationship between financial self-efficacy and the disposition effect. Our findings provide valuable guidance for individual investors to make financial decisions based on their characteristics. (shrink)

To have enough financial literacy, an investor must be able to make intelligent investment choices, and on the other hand, the heuristic bias, the framing effect, cognitive illusions, and herd mentality are all variables that contribute to the formation of behavioral biases, also known as illogical conduct, in the decision-making process. The current research looks specifically at behavioral biases and financial literacy influence investment choices, particularly on stock market investment. For the research, a representative sample of 450 individual investors (...) was evaluated. A structured questionnaire was designed using the Likert’s scale method to elicit the research variables, and the data acquired were analyzed using the SEM method. According to the findings, there was a statistically significant link between heuristic bias and the development of behavioral bias in decision-making. Nevertheless, cognitive illusions, the herd mentality, and the framing effect all have a deleterious impact on behavioral biases. In addition, investors often adhere to heuristic biases rather than other irrational strategies when making investment judgments. Therefore, individual investors’ financial literacy level greatly influences the choices made about investments in the stock market. (shrink)

Inappropriate social interactions of entrepreneurs can generate negative effects in the peer-to-peer lending market. To address this problem and assist peer-to-peer entrepreneurs in customizing their online interaction strategies, we used the cutting-edge cognitive-experiential self-system conceptual model and studied the relationship between peer-to-peer entrepreneurs’ interactions and financing levels. Online interactive information was categorized as emotional or cognitive, adding the moderator of entrepreneur popularity, and the effect of these interactions on individual investors was analyzed. We found that the entrepreneurs’ online interactive information (...) affected psychological perception of entrepreneurs and their corresponding brand image. The interaction between popularity and interactive information types was significant. The findings imply that less popular entrepreneurs should engage in emotional interactions, while more popular entrepreneurs should choose cognitive interactions. Online interaction created comparative advantages in the financing activities of peer-to-peer companies. These results expand understanding of the psychological facets of the consumer–brand relationship in the digital world, and extend the current literature. This study also highlights key areas of learning and application for both practitioners and scholars of organizational psychology. (shrink)

Behavioral Finance is an evolving field that studies how psychological factors affect decision making under uncertainty. This study seeks to find the influence of certain identified behavioral financial biases on the decision-making process of investors in developing countries. This research examines the moderating effect of Information asymmetry on the two most important and commonly used cognitive biases, namely Anchoring bias and Optimism bias and decision making and investigates whether Risk perception mediates the relationship between them or not. Quantitative research has (...) been conducted using a structured questionnaire for data collection. After completing the pilot study, a questionnaire was designed and sent to investors via online channels. Data has been collected from 317 real estate investors. Mediation analysis has been performed using model 4 and moderation analysis by applying model 15 of Process Macros for the interaction effect. The study investigated that both cognitive biases have a significant positive effect on investors’ decisions and Risk perception also significantly mediates the relationship between them. Consistency with other studies suggests that Information asymmetry has a significant moderating effect. The proposed conceptual model provides insight into how investors’ decisions are influenced by behavioral biases in the real estate sector and enhances the understanding of cognitive biases in the real estate sector. This study is recommended for real estate investors and policymakers of emerging and developed countries. The current study is the first of its kind, focusing on cognitive biases on investment decisions with mediating role of Risk perception and the moderating effect of Information asymmetry. (shrink)

Since Darwin, the idea of psychological continuity between humans and other animals has dominated theory and research in investigating the minds of other species. Indeed, the field of comparative psychology was founded on two assumptions. First, it was assumed that introspection could provide humans with reliable knowledge about the causal connection between specific mental states and specific behaviors. Second, it was assumed that in those cases in which other species exhibited behaviors similar to our own, similar psychological causes were at (...) work. In this paper. we show how this argument by analogy is flowed with respect to the case of second-order mental states. As a test case, we focus on the question of how other species conceive of visual attention, and in particular whether chimpanzees interpret seeing as a mentalistic event involving internal states of perception, attention, and belief. We conclude that chimpanzees do not reason about seeing in this manner, and indeed, there is considerable reason to suppose that they do not harbor representations of mental states in general. We propose a reinterpretation model in which the majority of the rich social behaviors that humans and other primates share in common emerged long before the human lineage evolved the psychological means of interpreting those behaviors in mentalistic terms. Although humans, chimpanzees, and most other species may be said to possess mental states, humans alone may have evolved a cognitive specialization for reasoning about such states. (shrink)

Over the past two decades, the phenomenon of socially responsible investing has become more widespread. However, knowledge about the individual socially responsible investor is largely limited to descriptive and comparative accounts. The question of "why do some investors practice socially responsible investing and others don't?" is therefore still largely unanswered. To address this shortcoming in the current literature, this paper develops a model of the decision to invest socially responsibly that is grounded in the cognition literature. The hypotheses (...) proposed in the model are tested with an experimental survey. The results indicate that the framing of the investing situation influences the likelihood of engagement in socially responsible investing and how much return the individuals are willing to sacrifice when choosing socially responsible over conventional investments. The study does not find support for a relationship between expectations about corporate social responsibility and the likelihood of engagement in socially responsible investing. (shrink)

The present paper investigates investor decision-making from a psychological standpoint and explores the role of consciousness and mindfulness on investors’ analytical ability and investment efficacy. A comprehensive survey instrument including sub-scales of different behavioural constructs is administered to 222 individual investors. We find evidence supporting the positive influence of cognitive capability on investment efficacy. The findings also suggest that mindfulness reliably mediates consciousness to cause an effect on cognitive capability. Higher cognitive capability will manifest in the form of detailed (...) analysis and interpretation of available information and improve stock selection, asset allocation, and market timing, thus increasing investment efficacy. A mindful investor can mitigate negative stimuli, emotional turmoil, dilemmas and distress in stock trading in a far more superior way to mediate consciousness for higher cognitive capability. The implications of the study indicate that consciousness and mindfulness-based interventions may facilitate making the investors stronger to manage difficult times and perform a careful rational assessment to eventually become successful investors. (shrink)

Accounting ethics failures have seized headlines and cost investors billions of dollars. Improvement of the ethical reasoning and behavior of accountants has become a key concern for the accounting profession and for higher education in accounting. Researchers have asked a number of questions, including what type of accounting ethics education intervention would be most effective for accounting students. Some researchers have proposed virtue ethics as an appropriate moral framework for accounting. This research tested whether Smithian virtue ethics training, based on (...) Adam Smith’s “The Theory of Moral Sentiments”, is effective in improving accounting student’s cognitive moral development. This research used a pre-test, treatment, post-test, quasi-experimental design utilizing the Defining Issues Test 2 instrument to measure students’ CMD. Analysis of DIT-2 gain scores did show a significant improvement in subjects’ personal interest scores and a significant improvement in an overall measure of CMD, the DIT N2 index, whereas their DIT-2 post-conventional scores did not improve significantly. This research supports the proposition that the concepts contained in Smithian virtue ethics can contribute to an effective accounting ethics education intervention. However, further research is required to determine what concepts should be included to improve accounting students’ post-conventional moral reasoning. (shrink)

Moral Seduction Theory suggests that auditors are morally compromised by the perceived consequences of their opinions. The root of the auditing problem appears to result in an unintentional bias rather than in dishonesty. Although important accounting reforms have been taken to deal with auditors' trustworthiness, their lack of independence has not been adequately addressed. The new regulation (Sarbanes-Oxley Act) is a consequence of an incorrect understanding of the main true source of auditor's biases. We have developed a cognitive approach by (...) connecting the Throughput Model (TM) to the Moral Seduction Theory. This approach allows a better understanding of how conflicts of interest lead auditors to avoid the issuance of warning signals to stakeholders. We have tested our model by conducting a hypothetical scenario with eighty experienced auditors from international accounting firms. Our results confirm auditors' unintentional reluctance to issue qualified audit opinions alerting investors due to their fear of precipitating clients' final bankruptcy. The main implication is that, more than a regulation, effort should be made in monitoring those conflicts of interest to reduce unintentional bias. (shrink)

This paper empirically investigates the impact of cognitive board diversity in education, expertise, and tenure facets on financial distress likelihood in the emerging economy of China. This study examines how this relationship varies across State-Owned Enterprises and Non-State-Owned Enterprises. Paper argues that the Chinese stock market, as a typical emerging market, is an excellent laboratory for studying the impact of board diversity on the probability of financial distress. Its underdeveloped financial system and inadequate investor protection leave firms unprotected from (...) financial hardship. A sample of 12,366 observations from 1,374 firms from 2010 to 2018 shows that cognitive diversity qualities are positively linked with Z-score, implying that directors with different educational backgrounds, financial skills, and tenures can assist in reducing the probability of financial distress. Cognitive board diversity reduces the likelihood of financial distress in SOEs and NSOEs. However, tenure diversity is insignificant in all cases. Furthermore, the robustness model “two-step system Generalized Methods of Moments ” demonstrated a positive association between educational diversity, financial expertise, and financial distress scores. The results have significant implications for researchers, managers, investors, regulators, and policymakers. (shrink)

Desire for flexibility suggests that the value of a choice-menu should increase with the number of options included. Complexity-aversion on the other hand may imply that the value of a menu decreases with its cardinality. We present the results of an experiment where 5 groups of subjects were asked to evaluate saving plans that let the investor choose between alternative indexing-schemes before the saving period ends. The complexity of the different plans was manipulated in two ways: (1) increasing the (...) number of indexing options; (2) reducing the quality of information upon which the choice between different indices is made. We show that an increase in the number of indexing-options produces a negative complexity effect when the quality of information is high. The same change however results in a positive flexibility effect when the quality of information is low. More generally our results suggest a `negative cross interaction of complexity effects' and that the impact of complexity is marginally decreasing. We discuss possible cognitive explanations to the observed evaluation-patterns. (shrink)

Prior studies on stakeholders’ responses to firms with high prior corporate social responsibility (CSR) engaging in corporate social irresponsibility (CSIR) show inconsistent results. To explore this inconsistency, we focus on the intentionality of CSIR and draw upon cognitive dissonance theory to examine how transgressional CSIR and accidental CSIR differently influence investors’ responses to firms with high prior CSR through both emotional (e.g., anger) and cognitive (e.g., moral judgment) processes. An experimental study using a facial expression analysis technology— FaceReader 5.0 (Study (...) 1) and a scenario experiment (Study 2), reveal that high prior CSR is a double-edged sword. Specifically, high prior CSR elicits an aggravating effect on investor responses (more anger, more negative moral judgment, and more negative effects on investment) in light of transgressional CSIR, but it has a buffering effect on investor responses (less anger, less negative moral judgment, and less negative effects on investment) in light of accidental CSIR. Moreover, we find that when prior CSR and CSIR are in the same (vs. different) domain, the aggravating effect of transgressional CSIR is strengthened, but the buffering effect of accidental CSIR is weakened. Our findings provide important theoretical and practical insights into the effect of prior CSR on investor responses in cases of different CSIR. (shrink)

The commodity market plays a vital role in boosting the economy. Investors make decisions based on market knowledge and ignore cognitive biases. These cognitive biases or judgment errors have a significant effect on investment decisions. Therefore, this study aimed to investigate the effect of emotional intelligence on decision-making. In addition, optimism bias and risk perception are the intervening variables between emotional intelligence and decision-making. So, this study contributes to the body of knowledge by examining the mediating role of optimism bias (...) and risk perception. The data were collected from the respondents of the commodity market and the 370 questionnaires were distributed among the investors, of which 337 respondents gave their feedback. The convenience base sampling technique is used due to the easy access of respondents, time factor, and cost factor. Data entered into the SPSS Statistics Version 26 and PROCESS macro model 6 were used for serial mediation. AMOS was used for the validity and model-fit analysis. The results of this study aligned with the literature that there is a significant effect of emotional intelligence on decision-making. It also observed that optimism bias has a positive effect on decision-making. The finding of this study will be helpful for the brokers, the government, and especially the investors. This study also proposed that future studies on the stock exchange and real estate market comparative analysis can be conducted. (shrink)

Investor-state-dispute-settlement is an arbitration mechanism to settle disputes between foreign investors and host-states. Seemingly a technical issue in private international law, ISDS procedures have recently become a matter of public concern and the target of political resistance, due to the power they grant to foreign investors in matters of public policies in the countries they invest in. This article examines the practice of ISDS through the lenses of liberal-statist theories of international justice, which value self-determination. It argues that the (...) investor-state arbitration system illustrates how liberal-statist theories of international distributive justice ought to care about relative socioeconomic disadvantage, contra the sufficiency principle that they typically defend. The sufficiency principle draws on a questionable conception of the freedom that self-determination consists in. (shrink)

A highly transmittable and pathogenic viral infection, COVID-19, has dramatically changed the world with a tragically large number of human lives being lost. The epidemic has created psychological resilience and unbearable psychological pressure among patients and health professionals. The objective of this study is to analyze investor psychology and stock market behavior during COVID-19. The psychological behavior of investors, whether positive or negative, toward the stock market can change the picture of the economy. This research explores Shanghai, Nikkei 225, (...) and Dow Jones stock markets from January 20, 2020, to April 27, 2020, by employing principal component analysis. The results showed that investor psychology was negatively related to three selected stock markets under psychological resilience and pandemic pressure. The negative emotions and pessimism urge investors to cease financial investment in the stock market, and consequently, the stock market returns decreased. In a deadly pandemic, the masses were more concerned about their lives and livelihood and less about wealth and leisure. This research contributes to the literature gap of investors’ psychological behavior during a pandemic outbreak. The study suggests that policy-makers should design a plan to fight against COVID-19. The government should manage the health sector’s budget to overcome future crises. (shrink)

Previous empirical research has found mixed results for the impact of corporate social responsibility (CSR) investments on corporate financial performance (CFP). This paper contributes to the literature by exploring in a two stage investor decision-making model the relationship between a firm’s innovation effort, CSR, and financial performance. We simultaneously examine the impact of CSR on both accounting-based (financial health) and market-based (Tobin’s Q) financial performance measures. From a sample of top corporate citizens, we find that: (1) a firm’s social (...) responsibility commitment (CSR) contributes to its financial performance; (2) after controlling for investment in innovation activities, CSR continues to have a positive impact on a firm’s financial performance; (3) the customer dimension of CSR has a positive effect on both CFP measures, whereas the employee dimension indicates a significant impact only on financial heath; and (4) the community relation dimension of CSR only affects the market-based CFP measure of firms with high innovation intensity. (shrink)

The aim of this study is to analyze investor behavior towards socially responsible mutual funds. The analysis is based on an experimental study where a sample of individuals takes investment decisions under different parameters of information about the investment alternatives and expected returns. In the experiment, each participant decides how to distribute an investment budget between two funds, returns on which are uncertain and change over time. Two treatments are conducted, each providing a different degree of information on the (...) socially responsible (SR) character of one of the two investment alternatives. The results obtained suggest that although individuals’ criteria for investment are essentially guided by returns and diversification, participants invest significantly more in a fund when they are explicitly informed about its SR nature. In particular, participants who declare being concerned about SR actually invest significantly more in the SR alternative. Furthermore, the level of SR faithfulness among a small group of investors is such that they invest the main share of their budget in the SR fund, even when the return differential is highly unfavorable. Providing clear information about the SR characteristics of an investment is crucial to help investors express their preferences. (shrink)

If our experiences are cognitively penetrable, they can be influenced by our antecedent expectations, beliefs, or other cognitive states. Theorists such as Churchland, Fodor, Macpherson, and Siegel have debated whether and how our cognitive states might influence our perceptual experiences, as well as how any such influences might affect the ability of our experiences to justify our beliefs about the external world. This article surveys views about the nature of cognitive penetration, the epistemological consequences of denying cognitive penetration, and the (...) epistemological consequences of affirming cognitive penetration. (shrink)

Cognitive penetration of perception, broadly understood, is the influence that the cognitive system has on a perceptual system. The paper shows a form of cognitive penetration in the visual system which I call ‘architectural’. Architectural cognitive penetration is the process whereby the behaviour or the structure of the perceptual system is influenced by the cognitive system, which consequently may have an impact on the content of the perceptual experience. I scrutinize a study in perceptual learning that provides empirical evidence that (...) cognitive influences in the visual system produce neural reorganization in the primary visual cortex. The type of cognitive penetration can be synchronic and diachronic. (shrink)

Concentrated attention on institutional investors' activism has been perceived in the last few decades and further intensified in the post‐Enron era. A new area of particular significance that has emerged is institutional investors' growing awareness and practice of socially responsible investment (SRI). This article starts by reviewing the importance of institutional investor activism and the historical implication of SRI. Significantly, various elements that give rise to the growth of SRI in the modern business world are considered in detail. It (...) is recognized that, although current empirical evidence suggests ambiguous effects of SRI, the positive impact of institutional investors' activism on SRI is likely to have been undermined due to the underdevelopment of evaluation systems, and SRI should stand out as a good investment option for its joint financial and societal concerns. Nevertheless, obstructions still exist in the exercise of investor activism and the pursuit of SRI strategy, which implies that, at least in the near future, SRI strategy will remain as a minor investment trend for institutional investors in Anglo‐American countries. Additional regulatory methods and awarding schemes are, therefore, expected to motivate institutional investors' activism on SRI, and subsequently to promote global sustainability. (shrink)

In this chapter, we analyze the relationships between the Internet and its users in terms of situated cognition theory. We first argue that the Internet is a new kind of cognitive ecology, providing almost constant access to a vast amount of digital information that is increasingly more integrated into our cognitive routines. We then briefly introduce situated cognition theory and its species of embedded, embodied, extended, distributed and collective cognition. Having thus set the stage, we begin by (...) taking an embedded cognition view and analyze how the Internet aids certain cognitive tasks. After that, we conceptualize how the Internet enables new kinds of embodied interaction, extends certain aspects of our embodiment, and examine how wearable technologies that monitor physiological, behavioral and contextual states transform the embodied self. On the basis of the degree of cognitive integration between a user and Internet resource, we then look at how and when the Internet extends our cognitive processes. We end this chapter with a discussion of distributed and collective cognition as facilitated by the Internet. (shrink)

Conscious experience is one of the most difficult and thorny problems in psychological science. Its study has been neglected for many years, either because it was thought to be too difficult, or because the relevant evidence was thought to be poor. Bernard Baars suggests a way to specify empirical constraints on a theory of consciousness by contrasting well-established conscious phenomena - such as stimulus representations known to be attended, perceptual, and informative - with closely comparable unconscious ones - such as (...) stimulus representations known to be preperceptual, unattended, or habituated. Adducing data to show that consciousness is associated with a kind of global workplace in the nervous system, and that several brain structures are known to behave in accordance with his theory, Baars helps to clarify many difficult problems. (shrink)

We investigate two under-explored factors in mitigating the risk of corporate fraud and regulatory enforcement against fraud, namely institutional investors and political connections. The role of institutional investors in the effective monitoring of a firm’s management is well established in the literature. We further observe that firms that have a large proportion of their shares held by institutional investors have a lower incidence of enforcement actions against corporate fraud. The importance of political connections for enterprises, whether in a developed market (...) such as the United States or an emerging market such as China, has been established by previous studies. However, we find evidence of another positive effect of political connections: they may reduce the incidence of enforcement action against corporate fraud. We also find that political connections play a more significant role in reducing regulatory enforcement incidents against non-state-owned enterprises and firms in weaker legal environments, whereas institutional ownership plays a more important role in reducing regulatory enforcement incidents against state-owned enterprises. (shrink)

This paper examines the impact on firm value created by investor reaction to same day news of corporate social responsibility and corporate social irresponsibility activities. First, using trading volume, the authors establish that the perceived value of moral capital generated by news involving institutional stakeholders is less clear to investors than that of the news involving technical stakeholders. Subsequently, the authors analyze abnormal returns from 565 unique firm events—each comprising at least one positive and one negative stakeholder news item. (...) Using signaling theory, the authors demonstrate that news of the number of CSR activities involving institutional groups counteracts the effects of same day CSiR news in an inverted U-shaped fashion. In contrast, they find that news of the number of CSR activities involving technical groups mitigates the effects of same day CSiR news in a U-shaped fashion. (shrink)

We aim to investigate the effect of corporate environmental responsibility (CER) engagement on investors' reactions. We also explore heterogeneity of this impact among different types of companies and different company's market performance. We use panel data models and quantile regression based on data related to firms listed on the A-share China security market and the final sample consists of 3,776 firm-year observations. The results show that CER engagement has a significant positive impact on investors' investment decisions. Further, investors are more (...) sensitive to CER engagement of high energy-consumption companies and no matter the company is a state-owned or a non-state-owned, CER engagement has a significant positive impact on investors' reactions. CER engagement has a significant positive impact on investors' reactions in all quantiles except one and the promoting effect increases first and then decreases with the growth of corporate market value from lower to upper quantiles. (shrink)

ABSTRACT Cognitive penetrability refers to the possibility that perceptual experiences are influenced by our beliefs, expectations, emotions, or other personal-level mental states. In this paper, I focus on the epistemological implication of cognitive penetration, and examine how, exactly, aetiologies matter to the justificatory power of perceptual experiences. I examine a prominent theory, according to which some cognitively penetrated perceptual experiences are like conclusions of bad inferences. Whereas one version of this theory is psychologically implausible, the other version has sceptical consequences. (...) In the second half of the paper, I suggest an alternative theory, drawing on recent empirical research on imagining-perception interaction and the epistemology of imagining. (shrink)

As cognitive neuroscience has advanced, the list of prospective internal, biological enhancements has steadily expanded. Education and training, as well as the use of external information‐processing devices, may be labeled as “conventional” means of cognition enhancement (CE). They are often well established and culturally accepted. By contrast, methods of enhancing cognition through “unconventional” means, such as ones involving deliberately created nootropic drugs, gene therapy, or neural implants, are nearly all to be regarded as experimental at the present time. (...) Transcranial magnetic stimulation (TMS), genetic interventions, brain‐computer interfaces and new senses are highly experimental and unlikely to be important over the next 15 years. Many of the concerns about enhancement are nonspecific to the tools used to achieve it, which means that enhancement–ethic scrutiny should also apply to nonbiological external enhancements. (shrink)

This paper explores several paths a distinctive third wave of extended cognition might take. In so doing, I address a couple of shortcomings of first- and second-wave extended cognition associated with a tendency to conceive of the properties of internal and external processes as fixed and non-interchangeable. First, in the domain of cognitive transformation, I argue that a problematic tendency of the complementarity model is that it presupposes that socio-cultural resources augment but do not significantly transform the brain’s (...) representational capacities during diachronic development. In this paper I show that there is available a much more dynamical explanation—one taking the processes of the brain’s enculturation into patterned practices as transforming the brain’s representational capacities. Second, in the domain of cognitive assembly, I argue that another problematic tendency is an individualistic notion of cognitive agency, since it overlooks the active contribution of socio-cultural practices in the assembly process of extended cognitive systems. In contrast to an individualistic notion of cognitive agency, I explore the idea that it is possible to decentralize cognitive agency to include socio-cultural practices. (shrink)

This chapter concerns the cognitive penetration of the visual experience of colour. Alleged cases of cognitively penetrated colour perception are of special import since they concern an uncontroversial type of visual experience. All theorists of perception agree that colour properties figure properly in the content or presentation of visual perception, even though not all parties agree that pine trees or causes or other "high-level" properties can figure properly in visual content or presentation. So an alleged case of this kind does (...) not require controversial commitments regarding the admissible contents of visual perception. The chapter clarifies this theoretical importance , identifying alleged empirical cases of cognitively penetrated colour perception, and then analyzing the implications of such cases for an epistemology of perception. (shrink)

This book introduces an account of cognitive architecture, Cognitive Pluralism, on which the basic units of understanding are models of particular content domains. Having many mental models is a good adaptive strategy for cognition, but models can be incompatible with one another, leading to paradoxes and inconsistencies of belief, and it may not be possible to integrate the understanding supplied by multiple models into a comprehensive and self-consistent "super model". The book applies the theory to explaining intuitive reasoning and (...) cognitive illusions and explores implications for epistemology, semantics, and disunity of science. (shrink)

We examine whether the behavior of institutional investors representatives on boards leads to observable differences in corporate finance. We find that directors representing pressure-sensitive investors prefer lower financial leverage whereas pressure-resistant directors show no particular preference. When analyzed separately, directors appointed by banks and insurance firms have different attitudes. Bank representatives on boards increase both the financial leverage and the banking debt. This result suggests that some types of institutional directors provide financial resources to the firms on whose board they (...) sit, supporting the view that boards manage the uncertainty associated with strategic decision making and provide firms with preferential access to resources and financial expertise. This research has interesting academic and policy implications for the debate over the proper degree of institutional involvement in corporate governance. Different institutional investors have different agendas and incentives for corporate governance, and, therefore, both researchers and policy makers should no longer consider institutional investors as a whole. In addition, our paper calls for new research on the causes and implications of institutional investor involvement in the corporate governance of nonfinancial firms. This new research could require new insights on the dynamics within the boards and on the interplay among the knowledge, incentives and attitudes of quite different directors. (shrink)

This paper explores the effects of incidental guilt on Socially Responsible Investment (SRI) decisions of retail investors. Do investors who feel guilty invest more in SRIs to clear their conscience? Are guilty investors willing to sacrifice returns to restore their moral selves? Using survey data from an online quasi-experiment among a sample of US retail investors, we find that individuals who experience incidental guilt are willing to invest more in SRI funds than those in a neutral state. We show that (...) this effect, albeit moderate in magnitude, cannot be explained solely by differences in retail investors’ moral reasoning, attitudes towards social responsibility, risk tolerance and demographic factors. When presented with a trade-off between sustainability, risk and return characteristics of the funds, guilty investors are more willing to sacrifice returns for greater sustainability than non-guilty participants. Our research provides new evidence of the effect that incidental guilt has on the sustainable investing decisions of retail investors. (shrink)

The paper uses questionnaire responses provided by a sample of ethical investors to investigate willingness to sacrifice ethical considerations for financial reward. The paper examines the amount of financial reward necessary to cause an ethical investor to accept a switch from good ethical performance to poor ethical performance. Conjoint analysis is used to allow quantification of the utilities derived from different combinations of ethical and financial performance. Ethical investors are shown to vary in their willingness to sacrifice ethical for (...) financial performance, and hence to display more heterogeneity than the all-encompassing ‘ethical’ label implies. Because of the existence of sub-groups of ethical investors with different attitudes towards financial reward, an attempt has been made to associate observable investors’ characteristics with their level of willingness to trade-off morality for cash. One sub-group of investors in particular appears highly resistant to the idea of accepting higher financial return as compensation for poor ethical performance. This unwillingness casts doubt on Jensen and Meckling’s widely reported claim that trade-off behaviour is ubiquitous in all areas of life. (shrink)

The study explores the challenges UK-based institutional investors face when trying to monitor investee companies and influence their social, environmental, and governance practices. Consistent with previous research, I find that misalignment of interests within the investment chain and dispersed ownership are factors which inhibit investor activism. However, other underexplored challenges include lack of investee company transparency and investor experience in activism, as well as low client demand for engagement and internal conflicts of interest. The results contribute to the (...) literature on institutional investor activism by using direct empirical evidence to systematically discuss the challenges to stewardship. Given the intensification of media and regulatory attention on shareholders in the post-global financial crisis era, coupled with investors’ growing awareness and practice of stewardship, the research opens new avenues for enquiry which go beyond the on-going debate about the monitoring versus short-termism roles of institutional investors. (shrink)

Distributed cognition refers to processes which are (i) cognitive and (ii) distributed across multiple agents or devices rather than performed by a single agent. Distributed cognition has attracted interest in several fields ranging from sociology and law to computer science and the philosophy of science. In this paper, I discuss distributed cognition from a social-choice-theoretic perspective. Drawing on models of judgment aggregation, I address two questions. First, how can we model a group of individuals as a distributed (...) cognitive system? Second, can a group acting as a distributed cognitive system be ‘rational’ and ‘track the truth’ in the outputs it produces? I argue that a group’s performance as a distributed cognitive system depends on its ‘aggregation procedure’ – its mechanism for aggregating the group members’ inputs into collective outputs – and I investigate the properties of an aggregation procedure that matter. (shrink)

Since the late 1990s, the number of apologies being offered by CEOs of large companies has exploded. Communication and management scholars have analyzed whether and why some of these apologies are more effective or more ethical than others. Most of these analyses, however, have remained at the anecdotal level. Moreover, the practical, economic consequences of apologies have not been examined. Almost no rigorous or systematic empirical work exists that examines whether stakeholders reward firms whose CEOs give apologies that are more, (...) rather than less, ethical; and punish firms whose corporate apologies are not ethically sound. This lacuna is surprising given that the whole purpose of an apology is to restore trust between the apologizer and the recipients of the apology. It is also surprising, given that stock market participants do appear, in at least some cases, to evaluate and respond to apologies by CEOs. When Johnson and Johnson was hit by the Tylenol poisonings, its stock price plummeted. One day after CEO James Burke’s apology—an apology widely praised for being ethically sound—approximately a half billion dollars of its previously lost stock value was restored. It appears, then, that a good CEO apology may lead to an increased stock value ceteris paribus. But is the Johnson and Johnson case representative of how the market responds in general to CEO apologies? (shrink)

This book is about the interweaving between cognitive penetrability and the epistemic role of the two stages of perception, namely early and late vision, in justifying perceptual beliefs. It examines the impact of the epistemic role of perception in defining cognitive penetrability and the relation between the epistemic role of perceptual stages and the kinds of cognitive effects on perceptual processing. The book presents the argument that early vision is cognitively impenetrable because neither is it affected directly by cognition, (...) nor does cognition affect its epistemic role. It also argues that late vision, even though it is cognitively penetrated and, thus, affected by concepts, is still a perceptual state that does not involve any discursive inferences and does not belong to the space of reasons. Finally, an account is given as to how cognitive states with symbolic content could affect perceptual states with iconic, analog content, during late vision. (shrink)