The Confusion of Taste and Consumption: Evidence from a Stated-Choice Experiment

Abstract

In this research, we conduct a stated choice experiment with German retail investors to elicit their preferences with respect to financial materiality of sustainability information. We find that there are market participants who are not able to distinguish between information related to sustainability and financial performance. In particular, investors seem to overreact to bad financially material sustainability information. Others seem to be prone to affect as they are intrinsically motivated to “do good” and erroneously project sustainability information onto future dividends, regardless of materiality. Our results highlight the importance of establishing appropriate classification systems for sustainability reporting.

Keywords: Sustainable investing, Stated choice experiments, Materiality, Salience, Sustainability reporting, Investor behavior

JEL Classification: G11, G41, Q56, M48