Does Social Capital Foster Sustainable Investment?

TY - JOUR

T1 - Does Social Capital Foster Sustainable Investment?

AU - Choy, Siu Kai

AU - Koci, Iva

AU - Wang, Mingzhu

N1 - Publisher Copyright: © 2022 The Authors. European Financial Management published by John Wiley & Sons Ltd.

PY - 2022/5/25

Y1 - 2022/5/25

N2 - How do country-level societal norms affect financial investments? We provide evidence that mutual funds managed in high social capital countries are inclined to consider environmental, social and governance filters in their portfolios, especially when acquiring new stocks and investing abroad. We argue that social capital nurtures the investment preferences of retail investors, whose demand incentivizes fund managers to respond in kind. Such impact is more pronounced in individualistic and high–power distance societies, suggesting that the social cohesion benefit of social capital complements altruistic inclinations in the former and provides mechanisms to punish unsustainable investment behaviour in the latter.

AB - How do country-level societal norms affect financial investments? We provide evidence that mutual funds managed in high social capital countries are inclined to consider environmental, social and governance filters in their portfolios, especially when acquiring new stocks and investing abroad. We argue that social capital nurtures the investment preferences of retail investors, whose demand incentivizes fund managers to respond in kind. Such impact is more pronounced in individualistic and high–power distance societies, suggesting that the social cohesion benefit of social capital complements altruistic inclinations in the former and provides mechanisms to punish unsustainable investment behaviour in the latter.

UR - http://www.scopus.com/inward/record.url?scp=85130454675&partnerID=8YFLogxK

U2 - 10.1111/eufm.12376

DO - 10.1111/eufm.12376

M3 - Article

SN - 1468-036X

JO - European Financial Management

JF - European Financial Management

ER -