Why Do Investors Hold Socially Responsible Mutual Funds?
Maastricht University; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute)
January 30, 2017
Journal of Finance, Forthcoming
To understand why investors hold socially responsible (SRI) mutual funds, we use administrative data and link them to survey responses and behavior in incentivized experiments. We find that both social preferences and social signaling are important factors for SRI decisions. Financial motives also play a role but appear to be of limited importance. Socially responsible investors in our sample expect to earn lower returns on SRI 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.
Number of Pages in PDF File: 86
Keywords: experimental finance, social preferences, socially responsible investments, mutual funds
JEL Classification: G11, D64, C90
Date posted: September 1, 2013 ; Last revised: February 13, 2017