Signaling and Stakeholder Honesty: On the Individual and Combined Effects of Owner Family Membership and Religious Affiliation

Abstract

Stakeholder honesty is highly important for managers, for instance, in decisions involving hiring. Due to reciprocity, stakeholders are more likely to be honest if the managers act honestly themselves. However, external stakeholders often cannot observe managers’ actions and instead have to rely on signals. This article examines the effects of two signals—a manager’s owner family membership and religious affiliation—on stakeholder honesty. By conducting an economic experiment and a survey, we find that stakeholders behave more honestly toward family managers compared to nonfamily managers. This effect is reinforced if the family manager is presented as religious.