Contracts with (Social) benefits: The implementation of impact investing

Christopher Geczy, Jessica S. Jeffers, David K. Musto and Anne M. Tucker

Journal of Financial Economics, 2021, vol. 142, issue 2, 697-718

Abstract: We draw on new data and theory to examine how private market contracts adapt to serve multiple goals, particularly the social-benefit goals that impact funds add to their financial goals. Counter to the intuition from multitasking models (Holmstrom and Milgrom, 1991), few impact funds tie compensation directly to impact, and most retain traditional financial incentives. However, funds contract directly on impact in other ways and adjust aspects of the contracts such as governance. In the cross-section of impact funds, those with higher profit goals contract more tightly around both goals.

Keywords: Impact investing; Contracts; Venture capital; Private equity; Socially responsible investing (search for similar items in EconPapers)
JEL-codes: A13 D23 D86 G24 K12 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:142:y:2021:i:2:p:697-718

DOI: 10.1016/j.jfineco.2021.01.006

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