Out-of-Pocket vs. Out-of-Investment in Financial Advisory Fees: Evidence from the Lab

Generally speaking, this research project attempts to study how different methods of payments affect consumers’ willingness to pay for a product. While the question is relevant to all sorts of products we confine our attention here to products involving uncertainty - specifically to the willingness to pay for financial advice. The assignment of payment through a checking account vs. through an investment portfolio causes a decrease of 25 percent in subjects’ valuation of financial advisory services. Most of this gap in the willingness to pay can be attributed to the deferral of payment until after the outcome of the investment is revealed. Our results highlight the difference between post-service and pre-service payments in a broader context, and provide an explanation for why allowing late payment, after the service has been performed and its outcome revealed, may increase the ex-ante willingness to pay for the service. A description of relevant data needed to replicate our analysis is reported in the attached file

Out-of-pocket vs. out-of-investment in financial advisory fees:Evidence from the lab

The implications of the method of payment to financial advisors on the behavior of individuals are of interest to economists and regulators around the globe. This paper uses an experimental approach to compare two common alternative forms of payment. The first is “out-of-pocket” (an upfront payment from a checking account), and the second is “out-of-investment” (a deferred payment from an investment portfolio account). We document that for the same financial advice, the subjects in the first treatment were willing to pay on average 25 per cent less than the subjects in the second treatment – payment following an investment outcome knowledge, where the payment was framed in terms of gains. We introduce an additional out-of-pocket payment structure where the actual payment is deferred until after the subject discovers the outcome of the investment. Thus, the design can be broken down into two distinct possible effects, an out-of-pocket vs. out-of-investment framing effect and a pre-outcome vs. post-outcome timing effect. We find that the timing effect is the key element: across out-of-pocket payment structures, the subjects were willing to pay significantly less in the pre-outcome treatment than their counterparts were in the post-outcome treatment. Our results highlight the difference between post-service and pre-service payments in a broader context, and provide an explanation for why allowing late payment, after the service has been performed and its outcome revealed, may increase the ex-ante willingness to pay for the service. © 2020 Elsevier B.V

Doing the Right Thing? The Voting Power Effect and Institutional Shareholder Voting

Through a combination of a controlled experiment and a survey, we examine the effect of voting power on shareholders’ voting behavior at general meetings. To avoid a selection bias, common in archival voting data, we exogenously manipulate shareholders’ power to affect the outcome. Our findings suggest that, when it comes to corporate decisions involving conflicts of interest, voting power nudges shareholders to oppose management and to choose the “right” alternative, that is, vote against a proposal which prima facie does not serve the company’s best interest, thereby taking an ethically sound decision. This effect obtained even when the dissenting vote contravened the choices of all other voters or self-interest. Furthermore, the drive “to do the right thing” was established as significant, above and beyond the economic incentive. We also demonstrate that strategic voting among institutional investors is contingent on voting power: When in a position to affect the outcome of a vote, institutional investors tend to eschew strategic considerations and display fewer consistent patterns in their voting, compared to situations in which their ability to make a difference is limited. In anticipation of a “bad” proposal to be put to vote at the general shareholder meeting, institutional investors prefer to negotiate terms with management beforehand, and vote against it only after such negotiations fail. Our results shed new light on the “behind the scenes” processes in shareholder voting and underscore the importance of institutional investor agency to corporate governance, accountability, and minority shareholder representation.THIS DATASET IS ARCHIVED AT DANS/EASY, BUT NOT ACCESSIBLE HERE. TO VIEW A LIST OF FILES AND ACCESS THE FILES IN THIS DATASET CLICK ON THE DOI-LINK ABOV

Out-of-Pocket vs. Out-of-Investment in Financial Advisory Fees: Evidence from the Lab

Generally speaking, this research project attempts to study how different methods of payments affect consumers’ willingness to pay for a product. While the question is relevant to all sorts of products we confine our attention here to products involving uncertainty - specifically to the willingness to pay for financial advice. The assignment of payment through a checking account vs. through an investment portfolio causes a decrease of 25 percent in subjects’ valuation of financial advisory services. Most of this gap in the willingness to pay can be attributed to the deferral of payment until after the outcome of the investment is revealed. Our results highlight the difference between post-service and pre-service payments in a broader context, and provide an explanation for why allowing late payment, after the service has been performed and its outcome revealed, may increase the ex-ante willingness to pay for the service. A description of relevant data needed to replicate our analysis is reported in the attached file

Meaning and gender differences

This study utilizes the crowdfunding setting, and examines gender differences with regard to the perceived meaning of donations. The crowdfunding mechanism creates a singular reciprocal interaction where motivations can be examined and compared. We show that women's perceived meaning is more sensitive to the existence of gift rewards than that of men. When the gift incentive is nonexistent, women attribute a greater sense of meaning to their contribution, whereas this effect is largely absent or even reversed in men. Our findings have far-reaching implications in all aspects of donor retention strategies. Specifically, our findings indicate that women are more aligned with the Kantian doctrine of rejecting self-interest considerations of altruistic behavior than men