Social Preferences and Corporate Investment
54 Pages Posted: 7 Jun 2023 Last revised: 8 Jun 2023
Date Written: June 6, 2023
This paper presents different social preferences and their impact on investors' and firms' decisions within a unified framework. We categorize preferences into three types: deontological, non-consequentialist, and consequentialist. When investors are large, all three preferences influence corporate investment. However, when investors are competitive, consequentialist preferences may become irrelevant for corporate investment, unlike the other two preference types. For these two preference types, portfolio divestment has significant effects on the supply of green and brown firms in the economy. We also discuss alternative channels through which social preferences influence decisions and review relevant experimental and empirical evidence.
Keywords: Social Preferences, Portfolio Choice, Corporate Investment
JEL Classification: G1, G3
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