The Moral Preferences of Investors: Experimental Evidence

48 Pages Posted: 2 Oct 2019 Last revised: 5 Jan 2022

See all articles by Jean-Francois Bonnefon

Jean-Francois Bonnefon

University of Toulouse 1 - Toulouse School of Economics Institute for Advanced Studies/Harvard Law School LWP

Augustin Landier

HEC

Parinitha Sastry

Federal Reserve Banks - Federal Reserve Bank of New York

David Thesmar

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: September 23, 2019

Abstract

We characterize investors’ moral preferences in a parsimonious experimental setting, where we auction stocks with various ethical features. We find strong evidence that investors seek to align their investments with their social values (“value alignment”), and find no evidence of behavior driven by the social impact of investment decisions (“impact-seeking preferences”). First, the willingness to pay for a stock is a linear function of corporate externalities, and is symmetric for positive or negative externalities. Second, whether charity transfers are contingent or independent on investors buying the auctioned stock does not affect their WTP. Our results are thus compatible with a utility model where non-pecuniary benefits of firms’ externalities only accrue through stock ownership, not through the actual impact of investment decisions. Finally, non-pecuniary preferences are linear and additive: willingness to pay for social externalities is proportional to the expected sum of charity transfers made by firms (even if some of these donations are negative).

Keywords: Socially Responsible Investing, Social Impact, Value Alignment, Deontology, Consequentialism

JEL Classification: G02, G11

Suggested Citation

Bonnefon, Jean-Francois and Landier, Augustin and Sastry, Parinitha and Thesmar, David, The Moral Preferences of Investors: Experimental Evidence (September 23, 2019). HEC Paris Research Paper No. FIN-2019-1350, Available at SSRN: https://ssrn.com/abstract=3458447 or http://dx.doi.org/10.2139/ssrn.3458447

Jean-Francois Bonnefon

University of Toulouse 1 - Toulouse School of Economics Institute for Advanced Studies/Harvard Law School LWP ( email )

21 allée de Brienne
31015 Toulouse cedex 6 France
Toulouse, 31015
France

Parinitha Sastry

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

David Thesmar

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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