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- Title
Mitigating the Mental Accounting Cognitive Bias through Instruction.
- Authors
Parsaei, Mona; Molanazari, Mahnaz; Mashayekhi, Bita; Aliabadi, Farzaneh Jalali
- Abstract
This study explores the influence of instructional interventions in mitigating mental accounting bias during capital investment decisions. Initially, we investigate the potential costly errors resulting from mental accounting. Subsequently, we employ instructional strategies to reduce this cognitive bias. Employing an experimental methodology, we employ an 8x2 mixed factorial design to examine the impact of financing sources on mental accounting and the effectiveness of instructional interventions. The findings reveal that managers prone to mental accounting tend to retain debt-financed assets over equity-financed assets. Importantly, instruction proves effective in alleviating this cognitive bias. This research holds significance for both academic scholars and practitioners. It sheds light on the deficiency of instructional resources in accounting education for fostering essential professional judgment skills among students. It is recommended that Finance, Business, and Accounting faculties incorporate modules on mental accounting and related cognitive biases in postgraduate programs. Furthermore, manufacturing industries can benefit from employee training programs to reduce cognitive biases associated with mental accounting in capital budgeting.
- Subjects
MENTAL accounting (Economic theory); COGNITIVE bias; INVESTMENTS; DECISION making in business; JUDGMENT (Logic); ACCOUNTING education; FACTORIAL experiment designs
- Publication
Iranian Journal of Accounting, Auditing & Finance (IJAAF), 2024, Vol 8, Issue 1, p89
- ISSN
2717-4131
- Publication type
Article
- DOI
10.22067/ijaaf.2024.43891.1319