Joint research unit 7235

Signaling Trustworthiness with Impact Investments: An Experimental Study

Speaker :Béatrice Boulu-Reshef (CES, Université Paris 1)

Béatrice Boulu-Reshef, Graciela Kuechle, Luise Rohland

Entrepreneurs may differentiate their ventures and attract investments by advertising that their firm produces positive externalities for society. Such signaling of entrepreneurs’ trustworthiness may be a prevalent practice in these investment opportunities which are casually referred to as “impact investment’’ by practitioners. This paper investigates this possible signaling by studying the interplay of altruistic, fiscal, and reputational motives that characterizes these investments in a laboratory experiment. In the experiment, the investor may transfer money to the entrepreneur, who may then invest some, all or none of this money onto a conventional investment opportunity or an impact investment opportunity involving a spillover, and then decide whether or not to transfer some of the funds back. Entrepreneurs choose a type of investment and their choice is visible to the investors. The results are that the choice alone of an impact project does not increase investors’ transfers to impact investments but a higher spillover does as long as the tax from possible gains is not too high. Pro-social entrepreneurs do not announce higher rates of spillovers. In the presence of tax, entrepreneurs internalize that a too high spillover could scare away investors. The experiment shows that the presence of impact investments helps investors coordinate onto different investment types. It identifies the mechanisms behind investors believing that socially-oriented entrepreneurs will be more trustworthy. Specifically, as investors’ transfers react to the effective societal impact and not to the mere project type, making that quantitative information visible allows investors to differentiate between investment opportunities.

AGENDA

Tuesday 5 March 2024

Recherche et Economie et Socioéconomie Politique, des Institutions et des Régulations (RESPIR)

Thomas Angeletti (Université Paris Dauphine PSL & IRISSO CNRS)

L’invention de l’économie française

Tuesday 5 March 2024

L’invention de l’économie française

Thomas Angeletti (Université Paris Dauphine PSL & IRISSO CNRS)

L’invention de l’économie française

Tuesday 5 March 2024

Webinar TELE – Theoretical European Law & Economics

Ester Manna (University of Barcelona, Spain)

3:00 pm to 4:15 pm (Paris time)

TBA

Tuesday 5 March 2024

TBA

Ester Manna (University of Barcelona, Spain)

3:00 pm to 4:15 pm (Paris time)

TBA

Wednesday 6 March 2024

Économies du monde musulman

Amal Briki (Agence Alnaft, Alger)

Les déterminants de la performance bancaire en Algérie

Wednesday 6 March 2024

Les déterminants de la performance bancaire en Algérie

Amal Briki (Agence Alnaft, Alger)

Les déterminants de la performance bancaire en Algérie

Thursday 7 March 2024

Climate Change has Likely Already Affected Yield Growth and Migration: Evidence from the Corn Belt.

Michaël Guillossou

Climate Change has Likely Already Affected Yield Growth and Migration: Evidence from the Corn Belt.

Thursday 7 March 2024

Doctorants

Michaël Guillossou

Climate Change has Likely Already Affected Yield Growth and Migration: Evidence from the Corn Belt.

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