Research on the determinants and effects of various governance mechanisms typically assumes that these mechanisms operate independently. However, since a variety of mechanisms are used to achieve alignment of the interests of shareholders and managers, we propose that the level of a particular mechanism should be influenced by the levels of other mechanisms which simultaneously operate in the firm. We examine the substitution effects between alternative internal governance mechanisms for a sample of 81 bank holding companies in the postderegulation period. Specifically, we consider the relationship between monitoring by outside directors and the following mechanisms: monitoring by large outside shareholders, mutual monitoring by inside directors, and incentive effects of shareholdings by managers. Our results provide evidence consistent with the substitution hypothesis. We examine the implications of our findings for future research in the area of corporate governance.

This study examined the influence of the strength of belief structures on selected aspects of the decision-making process. To examine these issues, a business-acquisition decision scenario was studied in an experiment. Subjects played the role of a CEO of an electronics firm and were asked to evaluate the attractiveness of six potential acquisition candidates and to rate various aspects of the associated decision process. We presented half the subjects with information that the belief structure of their organization was extreme, agreed upon, and clear. The other half was presented with information that there was disagreement about the belief structure and that it was more ambiguous and less extreme. The results clearly showed that the decision process is different for people who were presented with an agreed-upon, extreme, and tightly constructed belief structure when compared to those who received information reflecting a weak and loosely constructed belief structure. A strong belief structure resulted in less positive evaluations, information requested, and money allocated to explore incompatible acquisition candidates (and vice versa for a highly compatible candidate) when compared to subjects using a weak belief structure. In addition, subjects in the strong-belief condition reported that their decision process would be characterized by less doubt, less time, less difficulty, and less conflict compared to subjects in the weak-belief structure condition. Implications for both decision theory and practical decision processes are discussed. KEY WORDS Belief structures Automaticity Decision simplificationWhether one reviews the recent literature on classical decision theory (Stevenson et af., 1990) or the more applied aspects of organizational decision making (Klein and Calderwood, 1992) two common themes emerge. First, decision-making strategies vary from fairly simple heuristics and rules Journal of Behavioral Decision MakingVol. 6, Zss. No. 2to complex information and analytic processes. That is, there are a variety of ways to make decisions. This variety is partly determined by the type of decision involved (e.g. its demands, available information, possible solutions) and the social or organizational context in which it occurs (e.g. extent public, importance, accountability). Strategies will vary across decision types and decision settings (Abelson and Levi, 1985;Beach and Mitchell, 1978;Hammond, 1982; Payne et al., 1988). A second theme is that strategies vary, even for the same decision. Different people bring different experiences, beliefs and personal attributes to a particular decision. For example, experts differ from novices (Shanteau, 1992). People who believe that their life is controlled by external events make decisions differently from those that believe they can control their fate (Strickland, 1989). Risk-averse people differ from risk seekers (MacCrimmon and Wehrung, 1990;Kahneman and Tversky, 1984). Clearly, numerous different factors can influence the way in which a particular person makes a ...

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