A preliminary exploration of the effects of rational factors and behavioral biases on the managerial choice to invest in corporate responsibility

✍ Scribed by Tal Shavit; Avshalom M. Adam

• Publisher: John Wiley and Sons
• Year: 2011
• Tongue: English
• Weight: 131 KB
• Volume: 32
• Category: Article
• ISSN: 0143-6570
• DOI: 10.1002/mde.1530

✦ Synopsis

We explore a possible decision-making process in which mixes of rational and non-rational factors affect the choice made by a firm's management to invest in corporate responsibility. We propose that the rational factors affecting the decision-makers' investment choice are: (a) moral choice; (b) risk management; (c) consequential changes that would be required in corporate structure or production processes; and (d) long-term versus short-term considerations. The non-rational behavioral biases that we suggest affecting the decisionmakers' investment choice are: (a) attitude to risk, (b) status quo bias, (c) subjective discounting, and (d) myopic loss-aversion.