The Valuation of Corporate Social Responsibility: A Willingness to Pay Experiment

Guenster, Nadja; Brodback, Daniel; Pouget, Sebastien; Wang, Ruichen

Zusammenfassung

We present an experimental study of investors’ willingness to pay for socially responsible assets. We design an initial public offering experiment in which various assets may be issued with an identical financial risk and return profile but with different intensity and timing of social responsibility: the expected social benefit of assets may be high or low, and the social benefit may occur when the financial payoff is good or bad. The social benefit is represented in the experiment by a donation to a charity that is realized only if the asset is issued. In the experiment, individuals attribute a positive value to social responsibility at an increasing rate.

Moreover, when the societal benefit occurs along with bad financial performance, assets suffer from a price discount compared to cases in which it occurs with good performance. This implies that the utility function appear to be non-separable in wealth and societal benefits. We offer implications for the design of corporate social responsibility and for the pricing of responsible assets.

Schlüsselwörter
Socially Responsible Investing; Investment Decisions; ESG preferences; Experimental Finance