Identifying Bias Through Post-Report Interactions When Advisors Drink Their Own Kool-Aid

49 Pages Posted: 11 Apr 2014 Last revised: 10 Sep 2017

See all articles by Jeremiah W. Bentley

Jeremiah W. Bentley

Isenberg School of Management, University of Massachusetts Amherst

Robert J. Bloomfield

Cornell University - Samuel Curtis Johnson Graduate School of Management

Shai Davidai

Princeton University

Melissa Ferguson

Cornell University

Date Written: September 4, 2017

Abstract

Financial advisors frequently have an interest in the investments their clients make, forcing clients to distinguish the part of their advisor’s recommendation that reflects unbiased beliefs from the parts that reflect self-interested bias. This task is complicated by the tendency of advisors to ‘drink their own Kool-Aid’, making some of their bias a sincerely held belief. In our first experiment, we show that clients make such distinctions more accurately when they meet the advisor face-to-face to discuss the recommendation, compared to when they receive only a written recommendation. In our second experiment, we show that clients make such distinctions more accurately when advisors are asked to provide factual information about their own actions and clients are encouraged to focus on factual information. Our results underscore the importance of post-report interactions and the value of training to request, discern, and focus on advisors’ factual claims.

Keywords: Conflicts of interest, deception, deception detection, persuasion, sincerity, cheap-talk, reporting, motivated reasoning, self-deception, narrative reporting

JEL Classification: G14, G31, D82, D83, D80, C72, M41, M30, M40

Suggested Citation

Bentley, Jeremiah W. and Bloomfield, Robert J. and Davidai, Shai and Ferguson, Melissa, Identifying Bias Through Post-Report Interactions When Advisors Drink Their Own Kool-Aid (September 4, 2017). Available at SSRN: https://ssrn.com/abstract=2423131 or http://dx.doi.org/10.2139/ssrn.2423131

Jeremiah W. Bentley (Contact Author)

Isenberg School of Management, University of Massachusetts Amherst ( email )

Department of Accounting
Amherst, MA 01003
United States

Robert J. Bloomfield

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

450 Sage Hall
Ithaca, NY 14853
United States
607-255-9407 (Phone)
607-254-4590 (Fax)

Shai Davidai

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

Melissa Ferguson

Cornell University ( email )

Ithaca, NY 14853
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
260
rank
112,199
Abstract Views
1,405
PlumX Metrics