Why Do Investors Hold Socially Responsible Mutual Funds?

73 Pages Posted: 1 Sep 2013 Last revised: 22 Jul 2017

See all articles by Arno Riedl

Arno Riedl

Maastricht University; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Netspar

Paul Smeets

University of Amsterdam

Multiple version iconThere are 3 versions of this paper

Date Written: July 19, 2017

Abstract

To understand why investors hold socially responsible mutual funds, we link administrative data to survey responses and behavior in incentivized experiments. We find that both social preferences and social signaling explain socially responsible investment (SRI) decisions. Financial motives play less of a role. Socially responsible investors in our sample expect to earn lower returns on SRI funds than on conventional funds and pay higher management fees. This suggests that investors are willing to forgo financial performance in order to invest in accordance with their social preferences.

Keywords: experimental finance, social preferences, socially responsible investments, mutual funds

JEL Classification: G11, D64, C90

Suggested Citation

Riedl, Arno M. and Smeets, Paul, Why Do Investors Hold Socially Responsible Mutual Funds? (July 19, 2017). Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2318987 or http://dx.doi.org/10.2139/ssrn.2318987

Arno M. Riedl

Maastricht University ( email )

Department of Microeconomics & Public Economics
P.O. Box 616
Maastricht, 6200 MD
Netherlands

HOME PAGE: http://www.arnoriedl.com

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Paul Smeets (Contact Author)

University of Amsterdam ( email )

Plantage Muidergracht 12
Amsterdam, 1018TV
Netherlands

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