Working Paper: NBER ID: w29647
Authors: Jean-François Bonnefon; Augustin Landier; Parinitha R. Sastry; David Thesmar
Abstract: We characterize investors’ moral preferences in a parsimonious experimental setting, where we auction stocks with various ethical features. We find strong evidence that investors seek to align their investments with their social values (“value alignment”), and find no evidence of behavior driven by the social impact of investment decisions (“impact-seeking preferences”). First, the willingness to pay for a stock is a linear function of corporate externalities, and is symmetric for positive or negative externalities. Second, whether charity transfers are contingent or independent on investors buying the auctioned stock does not affect their WTP. Our results are thus compatible with a utility model where non-pecuniary benefits of firms’ externalities only accrue through stock ownership, not through the actual impact of investment decisions. Finally, non-pecuniary preferences are linear and additive: willingness to pay for social externalities is proportional to the expected sum of charity transfers made by firms (even if some of these donations are negative).
Keywords: moral preferences; investors; experimental evidence; ethical investing; corporate social responsibility
JEL Codes: G11; G41; M14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| investors' willingness to pay for a stock (G12) | corporate externalities (D62) |
| corporate donations (G30) | investors' willingness to pay for a stock (G12) |
| charity transfers contingent on stock purchase (D64) | investors' willingness to pay for a stock (G12) |
| value alignment preferences (D79) | investors' willingness to pay for a stock (G12) |