12/22/2023 0 Comments Hindsight bias exampleIn this regard, corporate “disasters” are not much different. In such cases, people want to know what caused the event and whether there is someone to blame and to be held legally liable for the consequences. Think for example of the sinking of the MS Estonia cruise ferry in 1994, the Deepwater Horizon oil spill in the Gulf of Mexico in 2010, or the Ponte Marandi bridge collapse in Genoa (Italy) in 2018, just to name a few. This contribution is particularly timely considering the many companies that are currently going bankrupt or are facing bankruptcy amidst the COVID-19 pandemic.Īfter a disastrous event, public outcry often follows over who is to blame. In two studies (total N = 1,729), we demonstrate that legal professionals tend to judge a director's actions more negatively and perceive bankruptcy as more foreseeable in hindsight than in foresight and that these effects are significantly stronger for those who endorse the notion that humans have free will. Additionally, to advance our understanding of the mechanisms underlying these biases, we also examine whether free will beliefs can predict susceptibility to hindsight bias and outcome bias in this context. The present study investigates whether professional legal investigators such as judges and lawyers are affected by hindsight bias and outcome bias when evaluating directors’ conduct in a bankruptcy case. The accurate assessment of directors’ liability can be jeopardized by having to judge in hindsight with full knowledge of the adverse outcome. Following a corporate disaster such as bankruptcy, people in general and damaged parties, in particular, want to know what happened and whether the company's directors are to blame.
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