The moral preferences of investors: Experimental evidence

Jean-François Bonnefon, Augustin Landier, Parinitha Sastry and David Thesmar

Journal of Financial Economics, 2025, vol. 163, issue C

Abstract: We characterize investors’ moral preferences in a parsimonious experimental setting, where we auction stocks with various ethical features. We find strong evidence that investors seek to align their investments with their social values (“value alignment”), and find no evidence of behavior driven by the social impact of investment decisions (“impact-seeking preferences”). First, the willingness to pay (WTP) for a stock is an increasing and quasi-linear function of corporate externalities. Second, this WTP does not change when corporate externalities are made contingent on investors buying the auctioned stock. Our results are thus compatible with a utility-maximization model where non-pecuniary benefits of firms’ externalities only accrue through stock ownership, not through the actual impact of investment decisions. Finally, the ability to directly contribute to the externality (by donating) does not reduce the willingness to pay for virtuous stocks.

Keywords: Portfolio choice; Externalities; Behavioral finance; ESG investing (search for similar items in EconPapers)
JEL-codes: D62 D64 G11 G41 (search for similar items in EconPapers)
Date: 2025
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Working Paper: The Moral Preferences of Investors: Experimental Evidence (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:163:y:2025:i:c:s0304405x24001788

DOI: 10.1016/j.jfineco.2024.103955

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