Why Do Investors Hold Socially Responsible Mutual Funds?

86 Pages Posted: 1 Sep 2013 Last revised: 13 Feb 2017

Arno Riedl

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

Paul Smeets

Maastricht University

Multiple version iconThere are 3 versions of this paper

Date Written: January 30, 2017

Abstract

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.

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

JEL Classification: G11, D64, C90

Suggested Citation

Riedl, Arno and Smeets, Paul, Why Do Investors Hold Socially Responsible Mutual Funds? (January 30, 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 Economics (AE1)
P.O. Box 616
Maastricht, 6200 MD
Netherlands

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

Paul Smeets (Contact Author)

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands
+31433883643 (Phone)

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