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E2836. Functional MRI Neuroimaging Study of Financial Decision Making By Business Managers

Elsamaloty H1,  HassabElnaby H1,  Wang x1,  Said A1,  Abdel-Maksoud A.2 1. University of Toledo, Toledo, OH; 2. United Arab Emirates University, Al-Ain, UAE

Address correspondence to H. Elsamaloty (

Objective: Functional MRI (fMRI) techniques have been increasingly used to study human cognitive functions, but applications of fMRI in research on brain activation of business managers during making financial decisions are very rare. This is perhaps partly due to a lack of behavioral paradigms of business financial decision making that are suitable for fMRI experiments. To explore application of fMRI in neuroeconomic research, we developed an fMRI experiment to study earnings management behavior. The current behavioral studies suggest that proximity to debt covenant violation conveys bad and good incentives to business managers while they are deciding to manage earnings. Based on these behavioral findings, we designed different scenarios to test a hypothesis that making a rational decision to manage earnings relies on activation in neurocircuits of executive functions prefrontal cortex (PFC), as well as neurocircuits of reward and stress including ventral striatum (VS) and amygdala.

Materials and Methods: We recruited local business owners and managers or trainees (n = 52) to participate in the fMRI study. To probe these neurocircuits, we designed different scenarios in which firms are either close (CLOSE) or far (FAR) from violating debt covenants. The subject is assigned a role of manager to choose whether to manage earnings to avoid debt covenant violations. The scenarios of CLOSE may lead to greater amygdala activation due to stress and greater reward-related VS activation when violation is avoided after earning management, as compared with the scenarios of far from violation situation.

Results: We found significant activation in PFC and visual cortex in visual attention and executive neurocircuits across all scenarios as compared to the baseline. Activation associated with making decisions on managing earning is greater in bilateral PFC regions (small volume corrected at p < 0.05; 1171 voxels; peak voxel: 0, 36, –12, Z = 3.74) in CLOSE scenarios than in FAR scenarios.

Conclusion: These results suggest that the tasks reliably activate the attention and cognitive brain regions, and making decision of earning management under high levels of financial stress requires more PFC cognitive functions.