Experienced and Novice Investors: Does Environmental Information Influence Investment Allocation Decisions?

Claus Holm and Pall Rikhardsson

European Accounting Review, 2008, vol. 17, issue 3, pages 537-557

Abstract: This paper examines the effect of environmental information on investment decisions. The results are based on an experiment in which groups of investors (varied by experience) were asked to make short- and long-term investment allocation decisions based on financial information and on supplementary environmental information (varied between cases). The results suggest that environmental information disclosure influences investment allocation decisions. The results also suggest that potentially mitigating factors such as the investment horizon and the experience level of investors affect investment allocation decisions, but the predicted main effect of positive environmental information holds across different investment horizons and investor types. Hence, the results are not attributable to interaction effects. Interestingly, compared to other company information, environmental information is not rated as being very important by participating subjects even though the results suggest that it influences investment decisions.

Date: 2008

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