A Comparison of Models Describing the Impact of Moral Decision Making on Investment Decisions

Abstract

Some rational decision theorists argue that moral considerations would introduce inefficiency to investment decisions. However, market demand for socially responsible investment is increasing. We test the suitability of (a) multiple attribute utility theory, (b) theory of planned behavior, and (c) issue-contingent model of ethical decision making in organizations to explain socially responsible investment behavior. In an experimental setting, 141 participants traded company shares on a computerized asset market. Over 12 periods, companies varied in morality and in profitability. Participants' bids and asks for shares were recorded. Results indicate that moral considerations influence investment decisions, controlling for profit. Differences between the three models are discussed.

Keywords: ethics, decision theory, behavioral finance

JEL Classification: D14, G11, M14