An Experimental Study on Motivations for Socially Responsible Investment

Miwa Nakai (), Tomonori Honda, Nariaki Nishino and Kenji Takeuchi
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Miwa Nakai: Graduate School of Economics, Kobe University, Japan
Tomonori Honda: The National Institute of Advanced Industrial Science and Technology, Japan
Nariaki Nishino: School of Engineering, The University of Tokyo, Japan

No 1314, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: This paper aims, through laboratory-based economic experiments, to shed light on the decision-making process in SRI and how it differs from decision making by other types of investors. We asked subjects to make decisions regarding stock investments on the basis of the three attributes of return, variance, and CSR, and we estimated their utility function to classify the types of investors. We also conducted a dictator game and lottery-choice experiments to measure subjects f heterogeneity in regard to three psychological factors: altruism, risk aversion, and time preference. We used psychological factors to apply a latent class model and we examined whether these factors affect investment in the stock of companies that actively promote CSR. The main finding of this study is that there is heterogeneity among investors, even among SRI investors. With the latent class model, we found conventional investors, SRI investors, and risk-loving SRI investors among our subjects. We hypothesised three psychological factors behind this heterogeneity. While the results support our altruistic hypothesis, the results under the risk-averse hypothesis and lower time preference hypothesis depend on which investor group is treated as SRI investors and also on the model specification. Although previous studies also found heterogeneity among SRI investors, no studies have tried to reveal the psychological background of the heterogeneity.

Keywords: Behavioural Finance; Economic Experiment; Socially Responsible Investment (search for similar items in EconPapers)
JEL-codes: C91 G02 M14 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2013-11
New Economics Papers: this item is included in nep-cbe and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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