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The Impact of Affective Reactions on Risky Decision Making in Accounting Contexts

Journal of accounting research, 2002-12, Vol.40 (5), p.1331-1349 [Peer Reviewed Journal]

Copyright 2002 The Institute of Professional Accounting, University of Chicago ;University of Chicago on behalf of the Institute of Professional Accounting, 2002 ;Copyright Institute of Professional Accounting Dec 2002 ;ISSN: 0021-8456 ;EISSN: 1475-679X ;DOI: 10.1111/1475-679X.t01-1-00056 ;CODEN: JACRBR

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  • Title:
    The Impact of Affective Reactions on Risky Decision Making in Accounting Contexts
  • Author: Moreno, Kimberly ; Kida, Thomas ; Smith, James F.
  • Subjects: Accounting ; Anger ; Business risks ; Capital budgeting ; Decision making ; Expected utility ; Financial data ; Financial investments ; Financial management ; Investment strategies ; Prospect theory ; Risk aversion ; Risk taking ; Statistical analysis ; Studies ; Tax deductions ; Taxpaying
  • Is Part Of: Journal of accounting research, 2002-12, Vol.40 (5), p.1331-1349
  • Description: In this study we examine whether managers' affective reactions influence their risk-taking tendencies in capital budgeting decisions. Prior research on risky decision making indicates that decision makers are often risk averse when choosing among alternatives that yield potential gains, and risk taking when the alternatives yield losses. The results reported here indicate that negative or positive affective reactions can change this commonly found risky behavior. Managers were generally risk avoiding (taking) for gains (losses) in the absence of affective reactions, as predicted by prospect theory. However, when affect was present, they tended to reject investment alternatives that elicited negative affect and accept alternatives that elicited positive affect, resulting in risk taking (avoiding) in gain (loss) contexts. The results also indicate that affective reactions can influence managers to choose alternatives with lower economic value, suggesting that managers consider both financial data and affective reactions when evaluating the utility of a decision alternative. These findings point to the importance of considering affective reactions when attempting to understand and predict risky decision making in accounting contexts.
  • Publisher: Boston, USA and Oxford, UK: Blackwell Publishers Inc
  • Language: English
  • Identifier: ISSN: 0021-8456
    EISSN: 1475-679X
    DOI: 10.1111/1475-679X.t01-1-00056
    CODEN: JACRBR
  • Source: Alma/SFX Local Collection
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