Abstract
This paper focuses on the impact of non-financial factors on individual investment decisions when information on a takeover bid announcement is public. Our results indicate that individual traits modulate the impact of information clarity and source reliability on decision-making. Thus, when individual traits are ignored, we find that investors use situational variables to distinguish noises from news. However, information clarity is more helpful than source reliability to interpret the information and take action even when source reliability diminishes. In contrast, when individual traits are considered, we observe that not only the lack of clarity, but also the lack of source reliability reduces situational strength. Furthermore, under uncertainty, individuals who are intuitive and tolerant to ambiguity are more capable of distinguishing between relevant and irrelevant stimuli and are more likely to expect a drop in the target’s share price. Finally, we observe that proactivity, in situations of uncertainty, is more important on action than cognitive style and tolerance to ambiguity. Intuition and proactivity impact positively on trading, while proactivity fosters coherence between perception and decisions.
Acknowledgements
Comments and suggestions received from Nikos Georgantzis, William Forbes, Gulnur Muradoglu, Werner DeBond Valle Santos and participants at the XIX ACEDE Conference are gratefully acknowledged as are those from anonymous referees. Any errors are the sole responsibility of the authors. They also thank Phil Jaggs for assistance and Alisa Larson and Catherine Ramberg for editorial assistance.
Notes
1. García-Ayuso and Jiménez (Citation1996) argue that research on financial decision-making can be performed by means of cognitive models.
2. See, among others, Powell and Ansic (Citation1997), Robert and Cox (Citation2001), Tutek, Aydogan, Tunc, and Vardar (Citation2010) and Santos and Barros (Citation2011).
3. De Bondt, Mayoral, and Vallelado (Citation2013) discuss a selection of some cognitive models of investor’s decision-making process.
4. See, among others, Oberlechner and Hocking (Citation2004) and Thayer (Citation2011).
5. Pornpitakpan (Citation2004) review the empirical evidence of the impact of the reliability of the source of information on persuasion.
6. See Armstrong, Cools, and Sadler‐Smith (Citation2012) for a review.
7. We have run all the analyses either with one scale for CSI or with two. The results using one scale confirm the results using two scales for CSI.
8. There are several authors that use similar designs to measure the influence of different variables in decision-making. For instance, Ghosh and Ray (Citation1997) introduce different levels of ambiguity and risk in decision-making.
9. We have not defined financial coherence indexes when participants perceive that the price will not be affected, since they give the same information as the one given by activity indexes when participants perceive the price will not be affected.