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Disclosing conflicts of interest - Do experience and reputation matter?

  • Koch, Christopher
  • Schmidt, Carsten

In a controlled laboratory experiment, we investigate the effects of disclosing conflicts of interest on the reporting behaviour of information providers. First, we replicate the findings of Cain, Loewenstein, and Moore (Cain, D.M., Loewenstein, G., & Moore, D.A. (2005). The dirt on coming clean: Perverse effects of disclosing conflicts of interest. Journal of Legal Studies 34, 1-25) that such disclosure can trigger more biased reporting, since it removes moral concerns. Second, we show that this effect diminishes or even reverts with experience and reputation. Third, we observe that non-disclosure can have the positive effect of facilitating the formation of reputation.

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Article provided by Elsevier in its journal Accounting, Organizations and Society.

Volume (Year): 35 (2010)
Issue (Month): 1 (January)
Pages: 95-107

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Handle: RePEc:eee:aosoci:v:35:y:2010:i:1:p:95-107
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  1. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  2. Ljungqvist, Alexander & Marston, Felicia & Starks, Laura T. & Wei, Kelsey D. & Yan, Hong, 2007. "Conflicts of interest in sell-side research and the moderating role of institutional investors," Journal of Financial Economics, Elsevier, vol. 85(2), pages 420-456, August.
  3. Sobel, Joel, 1985. "A Theory of Credibility," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 557-73, October.
  4. Joseph Weber & Michael Willenborg & Jieying Zhang, 2008. "Does Auditor Reputation Matter? The Case of KPMG Germany and ComROAD AG," Journal of Accounting Research, Wiley Blackwell, vol. 46(4), pages 941-972, 09.
  5. John List & Uri Gneezy, 2006. "Putting behavioral economics to work: Testing for gift exchange in labor markets using field experiments," Natural Field Experiments 00259, The Field Experiments Website.
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  7. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
  8. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
  9. Daylian M. Cain & George Loewenstein & Don A. Moore, 2005. "The Dirt on Coming Clean: Perverse Effects of Disclosing Conflicts of Interest," The Journal of Legal Studies, University of Chicago Press, vol. 34(1), pages 1-25, 01.
  10. Cowen, Amanda & Groysberg, Boris & Healy, Paul, 2006. "Which types of analyst firms are more optimistic?," Journal of Accounting and Economics, Elsevier, vol. 41(1-2), pages 119-146, April.
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