Disclosing Advisor's Interests Neither Hurts Nor Helps

35 Pages Posted: 1 Feb 2013

Date Written: September 15, 2012

Abstract

An informed advisor may have incentives to send a biased advice to an uninformed decisionmaker. We set up an experiment to study whether disclosure of the advisor's interests can foster truthfulness and trust. A key feature of our experiment is that we measure how advisors expect decisionmakers to react to their advice. This allows us to distinguish between strategic and nonstrategic (i.e. moral) reactions to disclosure by advisors.

We find that advisors do not expect decision makers to react drastically to disclosure. Also, advisors do not find deceiving morally more acceptable with disclosure than with no disclosure. Overall, disclosure neither hurts nor helps; deceptive advice and mistrust are equally frequent with as without disclosure. Relative to the aims of disclosure policies this is 'bad news'; relative to studies suggesting that disclosure may actually increase the rate of deception this may be regarded as 'good news'.

Suggested Citation

Ismayilov, Huseyn and Potters, Johannes (Jan) J. M., Disclosing Advisor's Interests Neither Hurts Nor Helps (September 15, 2012). Netspar Discussion Paper No. 09/2012-058. Available at SSRN: https://ssrn.com/abstract=2209664 or http://dx.doi.org/10.2139/ssrn.2209664

Huseyn Ismayilov

Tilburg University ( email )

Tilburg
Netherlands

Johannes (Jan) J. M. Potters (Contact Author)

Tilburg University - CentER ( email )

Department of Economics
P.O. Box 90153
5000 LE Tilburg
Netherlands
+31 13 466 8204 (Phone)
+31 13 466 3042 (Fax)

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