A Dollar for a Tree or a Tree for a Dollar? The Behavioral Effects of Measurement Basis on CSR Investment Decision

• In Event: DSFI: Part II

Abstract

We experimentally investigate how managers’ CSR investment decisions are affected by the measurement basis used in decision making (i.e., whether the investment decision is denominated in financial or nonfinancial measures). We posit that nonfinancial measures bring attention to the specific activities that characterize CSR investment, thereby reinforcing the society-serving nature of such investment. By highlighting CSR activities, nonfinancial measures activate managers’ personal norm toward CSR, which in turn influences their investment decision. As predicted, we find that the level of CSR investment is higher under a nonfinancial measurement basis than under a financial measurement basis, but only when the manager is personally supportive of CSR. The implications of our findings for theory and practice are discussed.

Author

• Jason Kuang, Georgia Institute of Technology