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The moral preferences of investors: Experimental evidence

Author

Listed:
  • Jean-François Bonnefon

    (TSM - Toulouse School of Management Research - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - CNRS - Centre National de la Recherche Scientifique - TSM - Toulouse School of Management - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse, TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements 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, IAST - Institute for Advanced Study in Toulouse, UT3 - Université Toulouse III - Paul Sabatier - Comue de Toulouse - Communauté d'universités et établissements de Toulouse)

  • Augustin Landier

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Parinitha Sastry

    (Columbia University [New York])

  • David Thesmar

    (MIT Sloan - Sloan School of Management - MIT - Massachusetts Institute of Technology, NBER - The National Bureau of Economic Research)

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.

Suggested Citation

  • Jean-François Bonnefon & Augustin Landier & Parinitha Sastry & David Thesmar, 2025. "The moral preferences of investors: Experimental evidence," Post-Print hal-05482460, HAL.
    • Handle: RePEc:hal:journl:hal-05482460
    DOI: 10.1016/j.jfineco.2024.103955
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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers

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