The Valuation of Corporate Social Responsibility: A Willingness to Pay Experiment

96 Pages Posted: 28 Oct 2022

See all articles by Nadja Guenster

Nadja Guenster

University of Münster - Finance Center Muenster; University of California, Berkeley

Daniel Brodback

University of Münster - Finance Center Muenster

Sebastien Pouget

Toulouse School of Economics

Ruichen Wang

University of Toulouse 1 - Toulouse School of Management

Date Written: October 28, 2022

Abstract

We present an experimental study of investors’ willingness to pay for socially responsible assets. We design an initial public offering experiment in which various assets may be issued with an identical financial risk and return profile but with different intensity and timing of social responsibility: the expected social benefit of assets may be high or low, and the social benefit may occur when the financial payoff is good or bad. The social benefit is represented in the experiment by a donation to a charity that is realized only if the asset is issued. In the experiment, individuals attribute a positive value to social responsibility at an increasing rate.

Moreover, when the societal benefit occurs along with bad financial performance, assets suffer from a price discount compared to cases in which it occurs with good performance. This implies that the utility function appear to be non-separable in wealth and societal benefits. We offer implications for the design of corporate social responsibility and for the pricing of responsible assets.

Suggested Citation

Guenster, Nadja and Brodback, Daniel and Pouget, Sebastien and Wang, Ruichen, The Valuation of Corporate Social Responsibility: A Willingness to Pay Experiment (October 28, 2022). Proceedings of the EUROFIDAI-ESSEC Paris December Finance Meeting 2022, Available at SSRN: https://ssrn.com/abstract=4260824 or http://dx.doi.org/10.2139/ssrn.4260824

Nadja Guenster (Contact Author)

University of Münster - Finance Center Muenster ( email )

Universitatsstr. 14-16
Muenster, 48143
Germany

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Daniel Brodback

University of Münster - Finance Center Muenster ( email )

Universitätsstraße 14-16
Muenster, 48143
Germany
+492518321964 (Phone)

Sebastien Pouget

Toulouse School of Economics ( email )

21 allée de Brienne
31015 Toulouse Cedex 6
France

Ruichen Wang

University of Toulouse 1 - Toulouse School of Management

2, rue du Doyen Gabriel Marty
Toulouse, 31042
France

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