The effect of environmental information on investment allocation decisions – an experimental study

Abstract

This paper focuses on the use of environmental information in investment decision making. The research approach employed is based on an experiment where three groups of final year finance students were asked to allocate investment funds between two companies based on financial accounts and information material from these companies in which environmental information was included in varying degrees. The overall conclusion is that the qualitative environmental information affects short term allocation decisions, hence indicating a risk reduction potential of environmental information comparable to the classic interpretation of financial information.The quantitative environmental information included in the experiment seems to mitigate rather than extend the directional effect of more environmental information. The evidence also seems to indicate that decision makers are not always aware which information categories affect their decision making. Hence, this has implications for how the potential value of environmental information is to be assessed. Finally, experimental studies as a methodology seem to be better suited to indicate actual effects of different types of information on decision making than attitude surveys.

Determinants of the adoption of sustainability assurance statements: an international investigation

“…It would be particularly useful to actively involve financial analysts in controlled experimental studies to assess alternative reactions to investment decision tasks following a manipulation of sustainability assurance engagements (e.g. Belkaoui, 1980;Chan and Milne, 1999;Milne and Chan, 1999;Rikhardsson and Holm, 2008). Such a research method would gain insights in the behavioural implications associated with the use of sustainability-related information by the financial community.…”

Management practices in Australasian ethical investment products: a role for regulation?

“…Another group of studies has concentrated on cognitive aspects of decision making and behavioural motivations of retail investors faced with 'qualitative information' such as selected environmental and social issues connected with the operations of investments (see Anand and Cowton, 1993;Goyen, 1998a, 1998b;Belkaoui, 1980;Haigh, 2007;Irvine, 1987;Lewis, 2001;Lewis and Cullis, 1990;Lewis and Mackenzie, 2000;Lewis et al, 1998;Mackenzie, unpublished Ph.D. thesis;Mackenzie and Lewis, 1999;Milne and Chan, 1999;Rikhardsson and Holm, 2006;Rivoli, 1995;Webley et al, 2001;Winnett and Lewis, 2000). Generally, this body of work, much of it consisting of experimental studies of actual and hypothetical investors, would lend support to the behavioural strand in institutional fi nance, challenging the mean-variance theorem of neoclassical economics (also see Statman, 1999;Thaler, 1980Thaler, , 1999Thaler, , 2000.…”

Assessing non-financial reports according to the Global Reporting Initiative guidelines: evidence from Greece

“…Publicly available information on topics such as environmental and social performance, management quality or internal governance transparency is clearly now vital for investors and shareholders in order to make fully accurate decisions (Holland and Foo, 2003;Repetto, 2005;Rikhardsson and Holm, 2006), as well as for the rest of the stakeholders -customers, suppliers, employees, communities and other social groups -who also expect a higher standard of accountability and demand a more comprehensive depiction of corporate impacts, risks and performance (GRI, 2002;Kaptein and van Tulder, 2003;Logsdon and Lewelynn, 2000;Rasche and Esser, 2006;Woodward et al, 1996;World Business Council for Sustainable Development, 2002). In addition, this emerging form of reporting can facilitate corporate planning and decision-making (Adams and Mc Nicholas, 2007;Albelda-Pé rez et al, 2007).…”