Many investors place ethical considerations above financial returns, irrespective of whether they have a pro-social or pro-self orientation.
Experimental research by SFI professors Rajna Gibson Brandon of the University of Geneva and Alexander F. Wagner of the University of Zurich, with co-authors Dr. Matthias Sohn of Zeppelin University and Professor Carmen Tanner of the University of Zurich, shows that many investors place ethical considerations above financial returns. In total, 60 percent of the participants invested with CEOs who did not engage in upwards earnings management and thus passed on the opportunity to earn a significantly higher bonus. The results apply to pro-social investors and to investors with a pro-self orientation, but the motivations for their choices differ. Pro-self investors value managerial honesty as a signal of the credibility of a CEO's future financial returns announcements, whereas pro-social investors base their decisions on moral values and are largely insensitive to financial returns.
The full version of the October issue of SFI's Practitioner Roundups is available at: http://sfi.ch/system/tdf/Roundup_Oct17_English.pdf?file=1.