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Evidence of Choice Avoidance in Capital‐Investment Judgements *
Author(s) -
Sawers Kimberly M.
Publication year - 2005
Publication title -
contemporary accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.769
H-Index - 99
eISSN - 1911-3846
pISSN - 0823-9150
DOI - 10.1506/2ukm-aw62-bna6-0ap6
Subject(s) - affect (linguistics) , control (management) , investment (military) , capital investment , investment decisions , decision process , capital (architecture) , psychology , function (biology) , decision making , cognition , capital budgeting , process (computing) , decision fatigue , actuarial science , business , social psychology , economics , business decision mapping , marketing , microeconomics , decision analysis , finance , r cast , behavioral economics , management science , political science , management , computer science , purchasing , history , archaeology , biology , operating system , communication , evolutionary biology , neuroscience , politics , project appraisal , mathematical economics , law
Evaluating capital‐investment decisions is an important function of managerial accountants. There is anecdotal evidence, however, that managers avoid making decisions or delay decisions, which is costly in terms of time, effort, and lost opportunities. Prior research has shown that choice avoidance among nonprofessionals making personal decisions is associated with having to choose between alternatives with very different features or that require trade‐offs of very important goals (choice difficulty). It is unclear, however, whether experienced managers, using the analytical decision tools at their disposal, respond in the same way as nonprofessionals when making accounting decisions. Hence, this study examines whether increased choice difficulty increases negative affect in the capital‐investment decision‐making process and, as a result, the tendency of managers to avoid choice even when analytical decision tools are used. In an experiment with 120 executives, participants facing more difficult decisions reported they felt more worried, nervous, uneasy, and anxious and had a greater desire to postpone making the decision than participants in a control group. Participants provided with a decision aid designed to help them focus their cognitive effort reported a lower desire to postpone making the decision than participants in the choice‐difficulty conditions without the decision aid. I conclude by discussing the result's implications for managers and accountants.