Cleansing Investor’s Conscience: The Effects of Incidental Guilt on Socially Responsible Investment Decisions

Victoria Gevorkova, Ivan Sangiorgi () and Julia Vogt
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Victoria Gevorkova: University of Reading
Ivan Sangiorgi: University of Reading
Julia Vogt: University of Reading

Journal of Business Ethics, 2024, vol. 193, issue 1, No 6, 89-114

Abstract: Abstract This paper explores the effects of incidental guilt on Socially Responsible Investment (SRI) decisions of retail investors. Do investors who feel guilty invest more in SRIs to clear their conscience? Are guilty investors willing to sacrifice returns to restore their moral selves? Using survey data from an online quasi-experiment among a sample of US retail investors, we find that individuals who experience incidental guilt are willing to invest more in SRI funds than those in a neutral state. We show that this effect, albeit moderate in magnitude, cannot be explained solely by differences in retail investors’ moral reasoning, attitudes towards social responsibility, risk tolerance and demographic factors. When presented with a trade-off between sustainability, risk and return characteristics of the funds, guilty investors are more willing to sacrifice returns for greater sustainability than non-guilty participants. Our research provides new evidence of the effect that incidental guilt has on the sustainable investing decisions of retail investors.

Keywords: Retail investors; Socially responsible investment; Morality; Psychological motives; Guilt; Emotions (search for similar items in EconPapers)
JEL-codes: A13 C25 D91 G11 M14 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10551-023-05585-9

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