The moral preferences of investors: Experimental evidence

Jean-François Bonnefon, Augustin Landier (), Parinitha Sastry and David Thesmar
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Jean-François Bonnefon: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Augustin Landier: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Parinitha Sastry: Columbia Business School - Finance and Economics Division
David Thesmar: MIT Sloan - Sloan School of Management - MIT - Massachusetts Institute of Technology, NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research

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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)
Date: 2025-01
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Published in Journal of Financial Economics, 2025, 163, pp.103955. ⟨10.1016/j.jfineco.2024.103955⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04935328

DOI: 10.1016/j.jfineco.2024.103955

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