New Publication in the European Accounting Review
A recent study published in the European Accounting Review by Matthias Sohn, Rajna Gibson Brandon (University of Geneva), Carmen Tanner (University of Zurich), and Alexander Wagner (University of Zurich, SFI) explores how investors’ perceptions of a CEO’s honesty influence investment decisions.
The researchers find that CEOs perceived as engaging less in earnings management are seen as more committed to honesty. This perception significantly shapes investor behavior: a one standard deviation increase in perceived commitment to honesty reduces the weight investors place on projected returns by 40%. The effect is strongest among "proself" investors, who prioritize self-interest but still respond to perceived moral cues. In contrast, "prosocial" investors rely more directly on their own moral values and those they attribute to the CEO, with financial returns taking a back seat. These findings challenge the notion that morality only matters to a niche market, showing that ethical considerations play a substantial role in investment decisions across investor types.
The study can be downloaded for free here
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