Gender-related variability in information processing of disclosure documents

Disclosure is used worldwide as a tool to increase transparency and help investors to make their decisions, thus partially overcoming asymmetric information in financial markets. This research seeks to explore gender–related variability in visual attention allocation to the Key Investor Information Document, and in the evaluation of product financial attractiveness. We exploited the eye–tracking methodology to collect neural data, responding to the call for considering new data sources. The analysis shows that men tend to dedicate more attention to the sections Objectives and Past performance while women spend more time to scan the sections Risk–reward profile and Costs and charges; when evaluating product financial attractiveness, women, with respect to men, tend to evaluate more often products as poorly financially attractive. Results reveal the existence of gender–related variability in the visual search strategy for relevant information, which, in turn, can impact on the phase of product evaluation. These findings highlight the professional responsibility of regulators and supervisors to monitor sellers’ and marketers’ behaviours when they interact with consumers. Moreover, this study could provide support to develop financial disclosure documents considering individual differences and ensuring that adequate attention is allocated by investors to all financial information sources, thus raising the level of investor protection. Eventually, the study stimulates innovations to be embedded in the world–wide ongoing regulatory developments that aim at increasing transparency requirements

Expectations of bank automation: the influence of consumer cognitive schema

Purpose This study aims to investigate the drivers of bank automation system performance expectancy compared to that of bank employees. The purpose is to shed light on the role played by consumers' cognitive schema on automation that is the perfect automation schema (PAS). Design/methodology/approach A survey was administered to about 500 Italian subjects to measure their PAS; financial knowledge, anxiety, and security; and sociodemographic and socioeconomic variables. Ordered probit regressions and an instrumental variable two-stage least squares regression are run. Findings The analyses reveal that cognitive schemas play a crucial role in consumer expectations in banking. Individuals with stronger PAS tend to have more positive expectations about bank automation performance compared to employee performance. Financial anxiety and knowledge positively affect bank automation performance expectancy while women, older people, and financially insecure subjects have poor expectations of automated banking systems. Originality/value This study extends the understanding of key consumer characteristics that affect bank automation performance expectancy compared to that of bank employees in services delivery in the Italian context. Moreover, it provides useful results for researchers, practitioners, banking institutions, and regulators

Anchoring effect in visual information processing during financial decisions: an eye-tracking study

When reading a financial disclosure document, subjects are faced with multiple information cues and might simplify decisional complexity by relying on heuristics. This study explores whether, in an attempt to filter information from the Payment Account Fees Information Document (FID), subjects anchor their evaluation to a specific item, leading to biased financial choices. By detecting the visual search strategy in 70 subjects through eye tracking, we observed that people exhibited systematic visual anchoring to the top of the document, which corresponds to the Liquidity section that displays the Annual Fee. Moreover, data revealed that subjects sometimes fail to recognize the most advantageous products. This mainly occurs when the Annual Fee is high, even if the other charges compensate for that amount, clarifying the link between visual search strategy and financial decisions. Data also showed the role of financial literacy in modulating attention, as poorly financially literate subjects are more prone to anchoring bias. The findings contribute to the neuroeconomics literature on anchoring effect and highlight practical implications for financial regulators and managers involved in the ergonomics of documents

Neural Correlates of Direct Access Trading in a Real Stock Market: An fMRI Investigation

Background: While financial decision making has been barely explored, no study has previously investigated the neural correlates of individual decisions made by professional traders involved in real stock market negotiations, using their own financial resources. Aim: We sought to detect how different brain areas are modulated by factors like age, expertise, psychological profile (speculative risk seeking or aversion) and, eventually, size and type (Buy/Sell) of stock negotiations, made through Direct Access Trading (DAT) platforms. Subjects and methods: Twenty male traders underwent fMRI while negotiating in the Italian stock market using their own preferred trading platform. Results: At least 20 decision events were collected during each fMRI session. Risk averse traders performed a lower number of financial transactions with respect to risk seekers, with a lower average economic value, but with a higher rate of filled proposals. Activations were observed in cortical and subcortical areas traditionally involved in decision processes, including the ventrolateral and dorsolateral prefrontal cortex (vlPFC, dlPFC), the posterior parietal cortex (PPC), the nucleus accumbens (NAcc), and dorsal striatum. Regression analysis indicated an important role of age in modulating activation of left NAcc, while traders' expertise was negatively related to activation of vlPFC. High value transactions were associated with a stronger activation of the right PPC when subjects' buy rather than sell. The success of the trading activity, based on a large number of filled transactions, was related with higher activation of vlPFC and dlPFC. Independent of chronological and professional age, traders differed in their attitude to DAT, with distinct brain activity profiles being detectable during fMRI sessions. Those subjects who described themselves as very self-confident, showed a lower or absent activation of both the caudate nucleus and the dlPFC, while more reflexive traders showed greater activation of areas involved in strategic decision making. Discussion: The neural correlates in DAT are similar to those observed in other decision making contexts. Trading is handled as a well-learned automatic behavior by expert traders; for those who mostly rely on heuristics, cognitive effort decreases, and transaction speed increases, but decision efficiency lowers following a poor involvement of the dlPFC

Sitting on the Board or Sitting on the Throne? Evidence of Boards{'} Overconfidence from the Italian Market

Between things we know with certainty and things we do not know absolutely there is a continuum spectrum of things we know something about: but how much do we know? People think they know more than they actually do: this tendency is defined as overconfidence. We explore the phenomenon with respect to mergers and acquisitions (M&As) and we introduce a new proxy for overconfidence: interlocking directorship (ID). We review different factors at the origin of this decision making (DM) bias and we theoretically justify why directors may be affected by it. Using event-study methodology, an empirical analysis is conducted on a multi-sector sample of Italian listed companies, which includes 296 M&A deals realized over the period 2000–2013. We analyse the impact of these extraordinary operations using cumulative abnormal returns (CARs) adding in the model control variables and measures of overconfidence. Results show negative and statistically significant average CARs around the date of announcement of the operations, suggesting that M&As are value destructive in the short term, and sitting on more than one board even increases this result, corroborating the hypothesis of managerial overconfident evaluations

Errors and failures in European banking: a cultural perspective

Misconduct is still widespread in banking. It often leads to economic and reputational losses and negatively affects trust in the economic and financial systems. Misconduct is mainly a result of errors in policies and procedures, of mistakes or malpractices in individual behaviours and of failure in management and control systems. Elaborating on the new theory of risk culture in banking, we develop a general framework of errors and failures in banking, on the basis of existing literature and taking into account the empirical evidence that is currently available. Particularly, we focus our attention on the influence of national cultures, the role of the organizational environment, errors and management practices and the impact on reputational risk role of banking regulators and supervisors in the handling of errors and mistakes. Our work helps demonstrate that culture is the main driver of organizational and individual behaviours and consequently of errors, mistakes and failures in bank management. Moreover, in a “sound” risk culture environment, the ability to manage errors must be in the toolkit of bankers and banking supervisors, enhancing cultural capital while preserving stability and efficiency of the whole financial system

Quando il central banking «cinguetta»: destinatari e contenuti dei tweet delle banche centrali

Lo studio del contenuto della comunicazione delle banche centrali europee attraversoTwitter, condotto tramite l’analisi testuale degli hashtag, rivela che la supervisione bancaria, l’infla- zione, l’unione monetaria e l’integrazione economica europea, la corporate governance e gli scenari futuri sono le aree più rilevanti. I risultati mostrano anche l'esistenza di alcuni cluster ben identificabili di destinatari, quali istituzioni internazionali, accademici e mass media

Watchdog or Pet dog: What is the role of media in shaping banks' risk culture?

This chapter aims to prove the role and infuence of mass media in controlling banks’ risk-taking behaviour and in shaping their risk culture