Disclosures About Disclosures: Can Conflict of Interest Warnings Be Made More Effective?
Journal of Empirical Legal Studies (June 2015)
30 Pages Posted: 28 Jun 2013 Last revised: 8 Mar 2015
Date Written: June 24, 2013
People regularly rely upon advisors who have conflicts of interest. The law often requires the advisors to disclose these conflicts. However, the very fact that the advisor is disclosing a conflict of interest might be interpreted by some people as a sign that the advisor is trustworthy, undermining the purpose of the disclosure. This article presents the results of an experiment indicating that requiring advisors to also disclose that they are legally required to disclose their conflict of interest makes people discount their advice more. This occurs, at least in part, because such advisors are viewed as less trustworthy than are advisors who merely disclose their conflict of interest without also stating that the disclosure is legally required.
Keywords: conflict of interest, disclosure, warning, consumer behavior, trust, investor protection
JEL Classification: D18, D80, K20, K29, K39, M31
Suggested Citation: Suggested Citation