When You Can't Count on the Numbers: Corporate Fraud, Generalized Suspicion and Investment Behavior

Peter Darke, Sauder School of Business, University of British Columbia
Jennifer Argo, University of Alberta

When You Can’t Count On the Numbers:

Corporate Fraud, Generalized Suspicion and Investment Behavior 

Peter R. Darke

Sauder School of Business

University of British Columbia

  

Jennifer J. Argo

University of Alberta

 

A dual process framework (Chaiken and Trope 1999) was used to investigate the effects of corporate fraud on individual investment decisions. Two experiments suggest that corporate fraud led to a broad defensive bias towards stock investments in a second-party firm due to generalized suspicion.  In addition, the prior reputation of the second-party firm did little to buffer the effects of generalized suspicion.  Process measures indicated that the generalized effects of fraud occurred automatically, through biased heuristic processing.  Overall, the findings were consistent with defensive processing, and suggest that investment fraud can cause investors to become irrationally suspicious
[ to cite ]:
Peter Darke and Jennifer Argo (2006) ,"When You Can't Count on the Numbers: Corporate Fraud, Generalized Suspicion and Investment Behavior", in NA - Advances in Consumer Research Volume 33, eds. Connie Pechmann and Linda Price, Duluth, MN : Association for Consumer Research, Pages: 147-148.