Download This PaperContracts with (Social) Benefits: The Implementation of Impact Investing
Journal of Financial Economics (JFE)
European Corporate Governance Institute – Finance Working Paper No. 674/2020
Jacobs Levy Equity Management Center for Quantitative Financial Research Paper
28 Pages Posted: 26 Apr 2018 Last revised: 25 Sep 2022
Date Written: June 12, 2020
Abstract
We draw on new data and theory to examine how private market contracts adapt to serve multiple goals, particularly the social-benefit goals that impact funds add to their financial goals. Counter to the intuition from multitasking models (Holmstrom and Milgrom, 1991), few impact funds tie compensation directly to impact, and most retain traditional financial incentives. However, funds contract directly on impact in other ways and adjust aspects of the contracts like governance. In the cross-section of impact funds, those with higher profit goals contract more tightly around both goals.
Keywords: impact investing, contracts, venture capital, private equity, socially responsible investing
JEL Classification: A13, D23, D86, G24, K12
Suggested Citation: Suggested Citation
Christopher Charles Geczy
University of Pennsylvania - The Wharton School, Finance Department ( email )
The Wharton School
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Jessica Jeffers (Contact Author)
HEC Paris ( email )
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David K. Musto
University of Pennsylvania - Finance Department ( email )
The Wharton School
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Anne M. Tucker
Georgia State University College of Law ( email )
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