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An Experimental Study on Motivations for Socially Responsible Investment

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Author Info

  • Miwa Nakai

    ()
    (Graduate School of Economics, Kobe University, Japan)

  • Tomonori Honda

    (The National Institute of Advanced Industrial Science and Technology, Japan)

  • Nariaki Nishino

    (School of Engineering, The University of Tokyo, Japan)

  • Kenji Takeuchi

    (Graduate School of Economics, Kobe University, Japan)

Abstract

This paper aims, through laboratory-based economic experiments, to shed light on the decision-making process in SRI and how it differs from decision making by other types of investors. We asked subjects to make decisions regarding stock investments on the basis of the three attributes of return, variance, and CSR, and we estimated their utility function to classify the types of investors. We also conducted a dictator game and lottery-choice experiments to measure subjectsf heterogeneity in regard to three psychological factors: altruism, risk aversion, and time preference. We used psychological factors to apply a latent class model and we examined whether these factors affect investment in the stock of companies that actively promote CSR. The main finding of this study is that there is heterogeneity among investors, even among SRI investors. With the latent class model, we found conventional investors, SRI investors, and risk-loving SRI investors among our subjects. We hypothesised three psychological factors behind this heterogeneity. While the results support our altruistic hypothesis, the results under the risk-averse hypothesis and lower time preference hypothesis depend on which investor group is treated as SRI investors and also on the model specification. Although previous studies also found heterogeneity among SRI investors, no studies have tried to reveal the psychological background of the heterogeneity.

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File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2013/1314.pdf
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Bibliographic Info

Paper provided by Graduate School of Economics, Kobe University in its series Discussion Papers with number 1314.

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Length: 35 pages
Date of creation: Nov 2013
Date of revision:
Handle: RePEc:koe:wpaper:1314

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Web page: http://www.econ.kobe-u.ac.jp
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Keywords: Behavioural Finance; Economic Experiment; Socially Responsible Investment;

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