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Transparency and empowerment in an investment environment

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  • Kanagaretnam, Kiridaran
  • Mestelman, Stuart
  • Nainar, S.M. Khalid
  • Shehata, Mohamed

Abstract

In a laboratory-controlled environment we provide experimental evidence on the effects of transparency (complete over incomplete information) and empowerment on trust and trustworthiness. We implement a simple version of the standard two-person investment game in a repeated game context with multiple treatments under two information environments. We find that when principals are empowered by being able to penalize agents who may not act in a way the principal believes is in the principal's best interest, the level of trust and investment increases over that which is realized in the absence of empowerment regardless of the degree of transparency. In transparent environments the effect of empowerment is about the same regardless of whether empowerment is introduced or removed. However, in opaque environments, the loss of empowerment has a substantially greater negative effect on trust than the positive effect associated with the introduction of empowerment.

Suggested Citation

  • Kanagaretnam, Kiridaran & Mestelman, Stuart & Nainar, S.M. Khalid & Shehata, Mohamed, 2014. "Transparency and empowerment in an investment environment," Journal of Business Research, Elsevier, vol. 67(9), pages 2030-2038.
  • Handle: RePEc:eee:jbrese:v:67:y:2014:i:9:p:2030-2038
    DOI: 10.1016/j.jbusres.2013.10.007
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    References listed on IDEAS

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    Cited by:

    1. Allen, Joseph A. & Lehmann-Willenbrock, Nale & Sands, Stephanie J., 2016. "Meetings as a positive boost? How and when meeting satisfaction impacts employee empowerment," Journal of Business Research, Elsevier, vol. 69(10), pages 4340-4347.
    2. repec:eee:beexfi:v:7:y:2015:i:c:p:33-41 is not listed on IDEAS
    3. 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.
    4. Pattupara, Rajesh & Kannan, Ramachandran, 2016. "Alternative low-carbon electricity pathways in Switzerland and it’s neighbouring countries under a nuclear phase-out scenario," Applied Energy, Elsevier, vol. 172(C), pages 152-168.
    5. Eser, Patrick & Singh, Antriksh & Chokani, Ndaona & Abhari, Reza S., 2016. "Effect of increased renewables generation on operation of thermal power plants," Applied Energy, Elsevier, vol. 164(C), pages 723-732.

    More about this item

    Keywords

    Transparency; Empowerment; Disempowerment; Trust; Reciprocity; Say-on-pay;

    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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