German and US Investment Professionals’ Use of Corporate Social Responsibility Disclosures in Their Personal Investment Decisions and Recommendations to Clients

50 Pages Posted: 17 Aug 2017 Last revised: 12 May 2020

See all articles by Markus C. Arnold

Markus C. Arnold

University of Bern - Institute for Accounting

Christoph Hörner

Tilburg University

Patrick Martin

University of Pittsburgh

Donald V. Moser

University of Pittsburgh - Accounting Group

Date Written: May 4, 2020

Abstract

We examine whether and how German and US investment professionals use corporate social responsibility (hereafter, CSR) information when making personal investment decisions and recommendations to clients. Using an experiment, we find that both German and US investment professionals use CSR information in several ways. First, CSR information affects investment professionals’ assessments of financial performance. Second, even after controlling for the effect of CSR information on their assessments of financial performance, both German and US investment professionals are willing to invest more when they assess CSR performance as higher. Importantly, this second effect is driven by their personal beliefs about the benefits to society of CSR activities. Third, German, but not US, investment professionals engage in motivated reasoning, i.e., the more strongly they believe that CSR benefits society, the more likely they are to believe that CSR improves financial performance. Finally, we find that both German and US investment professionals use CSR information in the same ways when making recommendations to clients as when making their personal investment decisions. We discuss the implications of these novel findings for theory and practice.

Keywords: Corporate social responsibility, CSR, professional investors, CSR disclosures, investment professionals

JEL Classification: G10, G11, G40, G41, M14, M41

Suggested Citation

Arnold, Markus C. and Hörner, Christoph and Martin, Patrick and Moser, Donald V., German and US Investment Professionals’ Use of Corporate Social Responsibility Disclosures in Their Personal Investment Decisions and Recommendations to Clients (May 4, 2020). Kelley School of Business Research Paper No. 17-61, AAA 2018 Management Accounting Section (MAS) Meeting, Available at SSRN: https://ssrn.com/abstract=3020887 or http://dx.doi.org/10.2139/ssrn.3020887

Markus C. Arnold

University of Bern - Institute for Accounting ( email )

Engehaldenstr. 4
Bern, 3012
Switzerland

Christoph Hörner (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Patrick Martin

University of Pittsburgh ( email )

3950 Roberto Clemente Drive
Pittsburgh, PA 15260
United States

Donald V. Moser

University of Pittsburgh - Accounting Group ( email )

264 Mervis Hall
Pittsburgh, PA 15260
United States
412-648-1726 (Phone)
412-648-1693 (Fax)

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