Consoladi, Innocenti, and Vercelli (2009)

Consolandi, Costanza, Alessandro Innocenti, and Alessandro Vercelli.  “CSR, rationality and the ethical preferences of investors in a laboratory experiment.”  Research in Economics, December 2009.

This experimental study aims to clarify to what extent and in which direction investors react to CSR (Corporate Social Responsibility) initiatives meant to upgrade the ethical standards of firms beyond the minimal requirements of law. Subjects in the laboratory were invited to invest their endowment in a portfolio of financial assets. We provided information on the expected returns of each stock and on its inclusion in an ethical index, or exclusion from it. Our findings show that subjects’ behavior appears to be a function not only of their individual pay-offs but also of the information on the ethical standards of the firms issuing stocks. Most of them, however, did not show a fully irrational behavior as they consistently correlated the share of stocks with their expected returns. We may conclude that the sizeable reaction of our investors to the inclusion of a stock in the ethical index, or its exclusion from it, is the fruit of a deliberate choice.