Does Social Capital Foster Sustainable Investment?

Forthcoming, European Financial Management

56 Pages Posted: 1 Aug 2022 Last revised: 4 Aug 2022

See all articles by Siu Kai Choy

Siu Kai Choy

King's College London

Iva Koci

King's College London

Mingzhu Wang

King'S College London

Date Written: December 1, 2021

Abstract

How do country-level societal norms affect financial investments? We provide evidence that mutual funds managed in high social capital countries are inclined to consider environmental, social, and governance filters in their portfolios, especially when acquiring new stocks and investing abroad. We argue that social capital nurtures the investment preferences of retail investors, whose demand incentivizes fund managers to respond in kind. Such impact is more pronounced in individualistic and high–power distance societies, suggesting that the social cohesion benefit of social capital complements altruistic inclinations in the former and provides mechanisms to punish unsustainable investment behavior in the latter.

Keywords: Mutual funds, sustainable investment, social capital, ESG

JEL Classification: G15, G41, M14, Z13

Suggested Citation

Choy, Siu Kai and Koci, Iva and Wang, Mingzhu, Does Social Capital Foster Sustainable Investment? (December 1, 2021). Forthcoming, European Financial Management , Available at SSRN: https://ssrn.com/abstract=4160921 or http://dx.doi.org/10.2139/ssrn.4160921

Siu Kai Choy

King's College London ( email )

Bush House, Kings Business School
30 Aldwych
London, WC2B 4BG
United Kingdom

Iva Koci (Contact Author)

King's College London ( email )

Bush House, King's Business School
30 Aldwych
London, WC2B 4BG
United Kingdom

Mingzhu Wang

King'S College London ( email )

30 Aldwych
Franklin-Wilkins Building
London, WC2B 4BG
United Kingdom

HOME PAGE: http://https://kclpure.kcl.ac.uk/portal/mingzhu.wang.html

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