Affective Reactions Influence Investment Decisions: Evidence from a Laboratory Experiment With Taxation

arqus Discussion Paper No. 160

28 Pages Posted: 13 Jun 2014

See all articles by Katharina Schüssler

Katharina Schüssler

Ludwig Maximilian University of Munich (LMU) - Munich Graduate School of Economics (MGSE)

Johannes Hewig

University of Würzburg

Dirk Kiesewetter

University of Würzburg

Martin Fochmann

Free University of Berlin; University of Cologne

Multiple version iconThere are 2 versions of this paper

Date Written: April 15, 2014

Abstract

We investigate the effect of taxation on gains and losses on the investment behavior of investors. Based on the insights of both economic research on the influence of taxation on investment behavior and psychological concepts dealing with the descriptive decision behavior of investors we expect investors to react to taxation of investment alternatives they face with behavioral and affective changes. By conducting a laboratory experiment with a total of 72 participants based on the experimental design of Fochmann, Kiesewetter, and Sadrieh (2012) that allows to quantify the reactions of investors to taxation on gains and loss deduction independent of their individual risk preferences and additionally measuring the affective reactions of our participants, we explore the role of affect in the relation of taxation and decision making. Hence, we are able to show that affective reactions to the taxation situations, in particular the perceived valence of these situations, influence the change in behavior of investors when confronted with taxation on gains and limited loss deduction.

Keywords: decision making; risk taking behavior; behavioral taxation; distorting taxation; affect; valence

JEL Classification: C91; D14; H24

Suggested Citation

Schüssler, Katharina and Hewig, Johannes and Kiesewetter, Dirk and Fochmann, Martin, Affective Reactions Influence Investment Decisions: Evidence from a Laboratory Experiment With Taxation (April 15, 2014). arqus Discussion Paper No. 160. Available at SSRN: https://ssrn.com/abstract=2449212 or http://dx.doi.org/10.2139/ssrn.2449212

Katharina Schüssler

Ludwig Maximilian University of Munich (LMU) - Munich Graduate School of Economics (MGSE) ( email )

Kaulbachstrasse 45
München, 80539
Germany

Johannes Hewig (Contact Author)

University of Würzburg ( email )

Sanderring 2
Würzburg, D-97070
Germany

Dirk Kiesewetter

University of Würzburg ( email )

Sanderring 2
Würzburg, D-97070
Germany

Martin Fochmann

Free University of Berlin ( email )

Thielallee 73
Accounting and Taxation
Berlin, 14195
Germany

University of Cologne ( email )

Albertus-Magnus-Platz
Behavioral Accounting/Taxation/Finance
Cologne, 50923
Germany

HOME PAGE: http://www.taxation.uni-koeln.de/de/team/prof-dr-martin-fochmann/

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
49
Abstract Views
1,029
PlumX Metrics