Are Managers Susceptible to the Ostrich Effect?

41 Pages Posted: 11 Jan 2021

See all articles by Darren Bernard

Darren Bernard

University of Washington - Department of Accounting

Nicole L. Cade

University of Pittsburgh - Accounting Group

Elizabeth Connors

affiliation not provided to SSRN

Date Written: December 21, 2020

Abstract

Using data from an information provider in the cannabis industry, we observe that managers of retail dispensaries appear to suffer from the “ostrich effect”—the selective acquisition of news based on an expectation of the likely hedonic response (e.g., avoiding bad news to avoid psychological discomfort). Managers are more likely to acquire store and product performance information as its expected valence (i.e., its “goodness” versus “badness”) increases and revisit this information more as its actual valence increases. These relations are attenuated when managers can more easily attribute the performance to external factors, suggesting managers intuitively acquire good news they can take credit for and avoid bad news they must internalize. Managers’ information acquisition decisions also appear to have real effects—future product stock-outs are greater when managers avoid the information. Our results suggest that hedonic effects of information influence key information acquisition choices of managers.

Keywords: Ostrich effect, information avoidance, managerial decision-making

JEL Classification: M41, G31, G40

Suggested Citation

Bernard, Darren and Cade, Nicole L. and Connors, Elizabeth, Are Managers Susceptible to the Ostrich Effect? (December 21, 2020). Available at SSRN: https://ssrn.com/abstract=3752507 or http://dx.doi.org/10.2139/ssrn.3752507

Darren Bernard (Contact Author)

University of Washington - Department of Accounting ( email )

PACCAR Hall
4273 E Stevens Way NE
Seattle, WA 98195-3200
United States

Nicole L. Cade

University of Pittsburgh - Accounting Group ( email )

United States

Elizabeth Connors

affiliation not provided to SSRN

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