Premium
Why Do Investors Hold Socially Responsible Mutual Funds?
Author(s) -
RIEDL ARNO,
SMEETS PAUL
Publication year - 2017
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.12547
Subject(s) - socially responsible investing , business , social responsibility , sample (material) , order (exchange) , global assets under management , investment (military) , fund of funds , institutional investor , finance , corporate governance , public relations , market liquidity , chemistry , chromatography , politics , political science , law
To understand why investors hold socially responsible mutual funds, we link administrative data to survey responses and behavior in incentivized experiments. We find that both social preferences and social signaling explain socially responsible investment (SRI) decisions. Financial motives play less of a role. Socially responsible investors in our sample expect to earn lower returns on SRI funds than on conventional funds and pay higher management fees. This suggests that investors are willing to forgo financial performance in order to invest in accordance with their social preferences.