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

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  • Tal Shavit
  • Avshalom M. Adam

Abstract

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 decision‐makers' investment choice are: (a) attitude to risk, (b) status quo bias, (c) subjective discounting, and (d) myopic loss‐aversion. Copyright (C) 2011 John Wiley & Sons, Ltd.

Suggested Citation

  • Tal Shavit & Avshalom M. Adam, 2011. "A preliminary exploration of the effects of rational factors and behavioral biases on the managerial choice to invest in corporate responsibility," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 32(3), pages 205-213, April.
    • Handle: RePEc:wly:mgtdec:v:32:y:2011:i:3:p:205-213
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    File URL: http://hdl.handle.net/10.1002/mde.1530
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    Cited by:

    1. Junjie Wu & George Lodorfos & Aftab Dean & Georgios Gioulmpaxiotis, 2017. "The Market Performance of Socially Responsible Investment during Periods of the Economic Cycle – Illustrated Using the Case of FTSE," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(2), pages 238-251, March.
    2. Shay Tsaban & Tal Shavit, 2024. "The Agency Problem of the Modern Era – The Conflict Between Shareholders’ and Managers’ Motives to Invest in Happiness," Journal of Happiness Studies, Springer, vol. 25(7), pages 1-18, October.
    3. Justyna Dyduch & Joanna Krasodomska, 2017. "Determinants of Corporate Social Responsibility Disclosure: An Empirical Study of Polish Listed Companies," Sustainability, MDPI, vol. 9(11), pages 1-24, October.
    4. Tal Shavit, 2013. "The effect of optimism bias on time preference," Economics and Business Letters, Oviedo University Press, vol. 2(3), pages 128-133.

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