Risk attitude, information selection, and information use in capital budgeting decisions

Studies reveal that risk attitude influences risk-taking behaviour such as capital budgeting decisions. Management accountants provide information to facilitate these decisions. However, the impact of risk attitude on decision-makers' information activities during decision-making is still unclear. Therefore, we apply a quasi-experimental approach to examine the impact of individual risk attitude on information selection and use in capital budgeting decisions. Consistent with information economics theory, risk-averse decision-makers select and use more information than risk-seekers. However, they also select and use irrelevant information. Although this information slack may reduce the procedural rationality of decision-making, it contributes to an increase of post-decisional, subjective decision certainty, especially for risk-averse decision-makers. The selection and use of relevant information are driven by the familiarity with the information and decision context. Our study contributes to the debate on effective information provision. Information providers such as management accountants should reduce information slack and improve management's familiarity with the decision context.