Choice Avoidance in Managerial Accounting Decisions
44 Pages Posted: 2 Sep 2003
Date Written: August 2003
Abstract
Managers typically use accounting decision tools like NPV or Real Options to help evaluate investment alternatives. These tools attempt to quantify the alternatives and make them more comparable in terms of overall cost or benefit. And yet, managers often delay making decisions even when decision tools indicate a preferred alternative. This avoidance behavior is costly. I posit this tendency to delay arises from the conflict inherent in choice and the manager's resulting negative affect. In this study I examine two dimensions of choice difficulty which cause conflict and are posited to increase negative affect and, as a result, increase the tendency of individuals to avoid action. Specifically, I investigate the influence of (1) difficult-to-compare features and (2) tradeoffs of highly valued goals on an individual's tendency to avoid choice when analysis indicates action would be appropriate. In an experiment with one hundred twenty executives, participants with either difficult-to-compare features or difficult tradeoffs report higher levels of decision difficulty, negative affect and desire to postpone making the decision than participants in a control group. In addition, I investigate the efficacy of a potential remedy. As a remedy, participants were asked to write a brief summary of each alternative. Participants who had either difficult-to-compare features or difficult tradeoffs with the remedy report similar levels of decision difficulty but lower desire to postpone making the decision than participants with either difficult-to-compare features or difficult tradeoffs without the remedy.
Keywords: choice avoidance, negative affect, decision difficulty, managerial accounting
JEL Classification: M40, M46, G31
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By George Loewenstein, Elke U. Weber, ...
-
Money, Kisses, and Electric Shocks: On the Affective Psychology of Risk
-
Emotion and Reason in Everyday Risk Perception
By Robin M. Hogarth, Mariona Portell, ...
-
By Robin M. Hogarth, Mariona Portell, ...
-
Outcomes in a Program that Offers Financial Rewards for Weight Loss
By John Cawley and Joshua A. Price
-
Does Affective Contagion Promote Coherent Political Thinking?
By Cengiz Erisen, Milton Lodge, ...
-
Human Reliability Analysis: A Review and Critique
By French Simon, Sondipon Adhikari, ...
-
The Paradox of Alypius and the Pursuit of Unwanted Information
By Justin Kruger and Matt Evans