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Exercising empowerment in an investment environment

Author

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  • Gomaa, Mohamed
  • Kanagaretnam, Kiridaran
  • Mestelman, Stuart
  • Shehata, Mohamed

Abstract

Using data from a laboratory-controlled environment we analyze the decisions of principals to veto the allocations of grossed-up investments proposed by their agents in a modified trust game. Using probit analysis, we find that the trust displayed by the principal and the trustworthiness of the agent are statistically significant variables in estimating the likelihood that a principal will exercise a veto and that the notion of fairness is important in explaining veto decisions. We also analyze the surpluses before and after the exercise of vetoes and find that potential surpluses rise with the introduction of empowerment. However, actual gains are not different from those realized in environments in which principals are not empowered. This result is qualified by the recognition that the number of decision rounds that are played by the participants in this experiment may not be sufficient for the full effect of empowerment to be realized.

Suggested Citation

  • Gomaa, Mohamed & Kanagaretnam, Kiridaran & Mestelman, Stuart & Shehata, Mohamed, 2015. "Exercising empowerment in an investment environment," Journal of Behavioral and Experimental Finance, Elsevier, vol. 7(C), pages 33-41.
    • Handle: RePEc:eee:beexfi:v:7:y:2015:i:c:p:33-41
    DOI: 10.1016/j.jbef.2015.07.003
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    1. Suárez Sánchez, Ana & Krzemień, Alicja & Riesgo Fernández, Pedro & Iglesias Rodríguez, Francisco J. & Sánchez Lasheras, Fernando & de Cos Juez, F. Javier, 2015. "Investment in new tungsten mining projects," Resources Policy, Elsevier, vol. 46(P2), pages 177-190.
    2. Salem, Razan, 2019. "Examining the investment behavior of Arab women in the stock market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 22(C), pages 151-160.
    3. Constantin-Marius APOSTOAIE, 2016. "Assessing National Environmental Performance In The Eastern Partnership Countries," EURINT, Centre for European Studies, Alexandru Ioan Cuza University, vol. 3, pages 149-168.
    4. Andrea Beltratti & Giovanna Paladino, 2015. "Bank leverage and profitability: Evidence from a sample of international banks," Review of Financial Economics, John Wiley & Sons, vol. 27(1), pages 46-57, November.
    5. Curran, Giorel, 2017. "Social licence, corporate social responsibility and coal seam gas: framing the new political dynamics of contestation," Energy Policy, Elsevier, vol. 101(C), pages 427-435.
    6. Auer, Benjamin R., 2016. "On time-varying predictability of emerging stock market returns," Emerging Markets Review, Elsevier, vol. 27(C), pages 1-13.
    7. Blicharska, Malgorzata & Smithers, Richard J. & Hedblom, Marcus & Hedenås, Henrik & Mikusiński, Grzegorz & Pedersen, Eja & Sandström, Per & Svensson, Johan, 2017. "Shades of grey challenge practical application of the cultural ecosystem services concept," Ecosystem Services, Elsevier, vol. 23(C), pages 55-70.
    8. Martin, Nigel & Rice, John, 2015. "Improving Australia's renewable energy project policy and planning: A multiple stakeholder analysis," Energy Policy, Elsevier, vol. 84(C), pages 128-141.
    9. Kuznetsov, Andrei & Dinwoodie, John & Gibbs, David & Sansom, Mark & Knowles, Harriet, 2015. "Towards a sustainability management system for smaller ports," Marine Policy, Elsevier, vol. 54(C), pages 59-68.

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    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D3 - Microeconomics - - Distribution
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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