Journal ArticleDOI
Finance organizations, decisions and emotions
TLDR
It is argued that while organizations cannot be said to 'think' or 'feel', they are rational and emotional, because impersonal trust, confidence and their contrary emotions are unavoidable in decision-making due to fundamental uncertainty.Abstract:
Analyses of global financial markets are dominated by atomized models of decision-making and behavioral psychology (exuberance or panic). In contrast, this paper argues that overwhelmingly, finance organizations rather than individuals make decisions, and routinely use emotions in formulating expectations. Keynes introduced emotion (business confidence and animal spirits) but in economics, emotion remains individualistic and irrational. Luhmann's system theory lies at the other extreme, where emotion like trust and confidence are central variables, functional in the reaction of complexity in sub-systems like the economy. The gap between irrational emotions aggregated to herd behavior in economics, and system trust applied to finance and money as a medium of communication in sociology, remains largely unfilled. This paper argues that while organizations cannot be said to think or feel, they are rational and emotional, because impersonal trust, confidence and their contrary emotions are unavoidable in decision-making due to fundamental uncertainty. These future-oriented emotions are prevalent within and between organizations in the financial sector, primarily in generating expectations. The dynamic of corporate activities of tense and ruthless struggle is a more plausible level of analysis than either financial manias in aggregate or system trust.read more
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References
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Trust as a Social Reality
J. David Lewis,Andrew J. Weigert +1 more
TL;DR: Trust is seen to include both emotional and cognitive dimensions and to function as a deep assumption underwriting social order as mentioned in this paper, and trust is an underdeveloped concept in sociology, promising theoretical formulations are available in the recent work of Luhmann and Barber.
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Embeddedness in the making of financial capital : How social relations and networks benefit firms seeking financing
TL;DR: In this article, the authors investigated how social embeddedness affects an organization's acquisition and cost of financial capital in middle-market banking and developed a framework to explain how embeddedness can influence which firms get capital and at what cost.
Journal ArticleDOI
The Categorical Imperative: Securities Analysts and the Illegitimacy Discount
TL;DR: This paper explored the social processes that produce penalties for illegitimate role performance in markets that are significantly mediated by product critics and found that failure to gain reviews by the critics who specialize in a product's intended category reflects confusion over the product's identity and that such illegitimacy should depress demand.