Doing Well and Doing Good: A Multi-Dimensional Puzzle

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CSR AS EXTERNALITY INTERNALIZATION AND PUBLIC GOOD PROVISION

Most CSR activities, based in particular on environmental and social factors, aim at reducing negative externalities (e.g. pollution abatement) or generating positive externalities (e.g. financing hospitals). Privately providing public goods hence is an important part of CSR activities. We present in this section three types of motivations for such private provision of public goods: deterring public regulations or public politics, responding to social pressure or private politics, or exerting one’s own moral duty to undertake social activities. Table 1.1 summarizes the key literature on CSR as an externality Integration and private provision of public good and highlights how each motive relates to a different source of market and government failure and yields a different CSR policy.

CSR, PUBLIC POLITICS AND REGULATION PREEMPTION

A first determinant of firms’ responsible behaviors arises from the regulator action. The threat of fines, new regulation compliance and other regulatory costs may induce higher CSR activities, but CSR may also be a response to government failure. Friedman (1970)’s view on CSR, according to which spending someone else’s money for a general social interest amounts to taxes and proceeds squandering for “social” purpose without political legitimacy, in fact vanishes when either government fails or wishes not to crowd-out private provision of public goods. So do CSR activities actually substitute for or complement public regulations in terms of public good provision, in particular when government fails?
On the one hand, CSR may substitute to the regulation when it preempts it. Lutz et al. (2000) propose a duopoly model of vertical product differentiation in which a minimum quality standard increases welfare but negatively impacts industry profits because reduced quality differentiation intensifies price competition. Thus to reduce regulatory costs, firms seek to preempt regulations before their promulgation, inducing the regulator to weaken its standards: welfare falls but profits increase. In the context of “corporate environmentalism”, Maxwell et al. (2000) identify conditions under which firms can profitably preempt regulatory threats and find that preemption occurs when industry organizing and lobbying costs are high. Empirical tests of the preemption theory are often based on case studies (see Arjaliès and Ponssard, 2010). Focusing on the metal-finishing industry, Brouhle et al. (2009) econometrically evaluate the respective influence on carbon emissions of a voluntary program and of the threat of formal regulation. Participation in the program and significant emission reductions were shown to be related to several forms of external pressure, including the regulatory threat.
On the other hand, Maxwell and Decker (2006) note that many environmental investments seem to be aimed at reducing the costs of complying with existing regulations, thereby suggesting that firm’s environmental performance and regulation are complements rather than substitutes. Here the regulator acts as an enforcer of existing environmental regulations and responds to voluntary environmental investments by reducing the frequency with which it monitors the firm. The firm is motivated to take action because of the reduction of its expected fine. Sam and Innes (2008) empirically support this reinforcement theory by showing that participation in a toxic waste reduction program (US 33/50) was motivated by the expectation of relaxed regulatory scrutiny. Using data on approximately 4000 facilities in seven OECD countries, Johnstone and Labonne (2009) provide strong evidence that environmental certification serves as a signal to regulatory authorities.
Beyond reinforcement theory, CSR might also complement regulations in cases of government failures, which have multiple origins (Bénabou and Tirole, 2010): for instance capture by lobbies and other interest groups; territoriality of jurisdiction (as for child labor for instance); or a combination of inefficiency, high transaction costs, poor information and high delivery costs. For instance, the regulator may share the desire to reduce costs of regulation and thus be willing to negotiate voluntary agreements (Lyon and Maxwell, 2008).

CSR AS A RESPONSE TO SOCIAL PRESSURE AND PRIVATE POLITICS

Citizens and social activists can also make direct demands for firms to integrate their negative externalities, such as water pollution or toxic air emissions. Hence a major determinant of CSR activities would be to respond to social pressure or deter private politics. According to Baron (2003), the term ‘private’ means that the parties do not rely on public order (lawmaking), while ‘politics’ refers to individual and collective action. As emphasized by Van den Berghe and Louche (2005) « companies are facing a new invisible hand, that is non-market forces exerted by NGOs, media trade-union and others, and influenced by this new invisible hand, they start to consider CSR as prerequisite for sustainable growth and welfare ». When CSR activities consist in private social redistribution and partial internalization of firm externalities, our society might consider the activity and use of public goods by less responsible firms as socially unfair and thus withdraw its “license to operate” (Post et al., 2002). When does a corporation become contestable and how can CSR mitigate contestability? How do social activists exert pressure on firms? Why are some firms targeted and others not?
The theory of contestable management states that anticipated threats of social protest can effectively discipline firm’s behavior. Using the instructive case of the Genetically Modified Organism industry boycott in France, Hommel and Godard (2001, 2002) consider that a firm’s contestability is characterized by its exposure to two types of threats: contestation of its social license to produce and innovate, based on environmental or health-related risks to the community attributed to the firm’s products or processes; and economic contestation from competitors. Hence for a corporate activity to become contestable, firms need to either be innovators of belong to notoriously dirty industries, and be significant actors on their market. The link between firm visibility on its market and CSR level has been found in many empirical studies (Margolis and Walsh, 2001). As such, CSR can be a strategic policy to prevent social contestability and protects the firm long term interests (Hommel and Godard, 2001).
Recent contributions from the economics of networks and social capital enrich the previous idea by supporting that CSR can modify business and social networks, thus providing firms with strategic flexibility. Burt (2001, p.32) defines social capital as “the contextual complement to human capital. The social capital metaphor is that the people who do better are somewhat better connected”. The author also defines holes in structural social networks and argues that individuals whose relationships span such holes gain competitive advantage (p.34). Quenneville-Éthier and Sinclair-Desgagné (2010) demonstrate that CSR enables firms to do so. Using the case of the multinational Rio Tinto Alcan in remote Canadian and French communities, the authors analyze how CSR may alleviate multinationals’ high exit costs from mono-industrial regions by reducing community dependence to these multinationals.
Most often, social pressure is not directly exerted by citizens but rather by social activists, such as Non-Governmental Organizations (NGOs). Defined by Baron (2001) as private politics, NGOs make direct demands on corporations enforced either by threats (boycott, negative propaganda) or rewards (endorsements), without reliance on public institutions or shareholders. Baron and Dirmeier (2007) highlight that the former is likelier than the latter, threats being more likely to decrease the level of the targeted activity. NGOs campaigns are a powerful lever of social pressure designed to negatively impact sales, employee morale and corporate recruitment efforts. Moreover, Sinclair-Desgagné and Gozlan (2003) theoretically show that when NGOs wield big threat, it can induce “green” firms to distinguish themselves by issuing a detailed CSR report; whereas if weak, they release only moderately informed CSR reports as other firms do. Based on signaling theory, Feddersen and Gilligan (2001) also point out that information-supplying activist can alter the decisions of firms and consumers and enhance the social welfare of market exchange. A framework for consumers’ motivations for boycott participation has been proposed and tested on a case study by Klein et al. (2004). Focusing on facilities reporting to toxic release inventory from 1988 to 1994, Sam and Innes (2008) find empirical evidence that participation in voluntary programs and pollutant reductions were prompted by a firm’s likelihood of becoming a boycott target.
However, not all contestable firms become the target of social activists. Visibility is increased by the extent of the public contact, as in consumer-oriented industries (Margolis and Walsh, 2001) or notoriously dirty industries (Brown et al., 2006). Siegel and Vitaliano (2007) add that firms selling experience goods (whose quality cannot be observed before use, but is ascertained upon consumption, such as a bottle of wine) or credence goods (whose quality cannot be evaluated in normal use, such as bioorganic wine) are more likely to be socially responsible than firms selling search goods (whose quality is easily ascertain, such as a wine glass). In this literature, social pressure appears as a major driver of CSR for large, consumer-oriented or notorious firms which commit to it in order to protect their license-to-operate.
NGOs do not necessarily target firms with highest levels of negative externalities. Baron and Dirmeier (2007) indeed develop a theory of adversarial NGOs campaigns displaying that NGOs prefer to target sequentially one firm rather than multiple firms simultaneously, pick up issues with high social values, and finally target firms more likely to be responsive to the campaign. Baron (2009) also highlights that if citizens do not distinguish between morally motivated CSR and CSR induced by social pressure, the activist is more likely to target the softer, morally motivated firm. In other words, this soft firm hypothesis states that social activists may in fact target their campaign against morally-managed firms because they have more to lose from the campaign than do self-interested firms. Empirical support is brought by Baron et al. (2008) on a large sample of firms over the 1996-2004 period.

CSR, ALTRUISM AND PRO-SOCIAL BEHAVIORS

Finally, recent developments in psychology and behavioral economics can be used to examine CSR as a behavior of ’sacrificing profits in the social interest’ (Bénabou and Tirole, 2010). In this interpretation, CSR is a prosocial behavior which reflects managers’ willingness to engage in philanthropic activities, provide public good and internalize the negative externalities of their corporation. Typically this corresponds to Milton Friedman (1970)’s view that CSR amounts to spending others’ money for individual pro-social motivations.
Economic agents may want to promote values that are not shared by law-makers. Because preferences are heterogeneous, it is inevitable that some managers’ values will not be fully reflected in policy and projected onto their corporate decisions. Pro-social behaviors result from several interacting motivations, from intrinsic (genuine) altruism to extrinsic (material) motivation, social and self-esteem concerns (Bénabou and Tirole, 2010). Image concerns may hence act as a cheap incentive device to induce responsible behaviors. For Baron (2010) as well, CSR may be viewed as self-regulation motivated by moral concerns. More precisely, he characterizes the scope of self-regulation as a function of the form and strength of moral preferences and analyzes how free-riding problems may be mitigated in this context. Empirically, tests of managers’ pro-social behaviors most often merge with tests of the agency theory in which CSR is considered as a management perquisite (Baron et al., 2008; Brown et al., 2006).
Yet, pro-social motivation may also be subject to offsetting effects. Searching out excessive social prestige may crowd out the incentive provided by publicity on pro-social behaviors. The more advertised CSR activities are, the more they might be discounted as mere image-seeking rather than altruism. In this line, Bénabou and Tirole (2006) develop a theory of pro-social behavior that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect. Moreover, ‘buying’ social prestige with CSR may be a zero-sum game. For instance, the buyer of a hybrid car feels and looks better, but makes his neighbors (both buyers and non-buyers of hybrid cars) feel and look worse (Bénabou and Tirole, 2010). From a public policy perspective, pro-social behaviors stemming from image concerns imply another externality. In fact, the image value ‘bought’ by a responsible firm increases the private individual return of the firm and partly reduces the negative social externality costs to be corrected. Hence, CSR motivated by altruism or pro-social behaviors may substitute partly to publicly provided public good.
Finally, individuals can express their moral concerns about the ethical behavior of companies by means of ethical buying or ethical consumption. How firms can strategically exploit this consumer preference anchored in pro-social behavior is the focus of next section.

CSR AS A BUSINESS STRATEGY IN IMPERFECT COMPETITION

The second category of determinants of CSR behaviors lies in product market structure and imperfect competition. In a world populated by heterogeneous consumers including ’green’ actors, a subset of producers can be expected to take voluntary steps to improve their environmental or social performance in order to obtain a label and extract a green premium. Basically, firms competing in imperfect markets may, and often do, over-comply with existing laws, thereby developing CSR activities (Reinhardt and Stavins, 2010). We successively consider product differentiation generated by consumers’ heterogeneity, subsequent market structures, and the misuse of information asymmetry under the form of green-washing. Table 1.2 summarizes the key literature on CSR driven by imperfect competition and highlights how each motive relates to a different source of market failure and yields a different CSR policy.

CSR, CONSUMER HETEROGENEITY AND PRODUCT DIFFERENTIATION

If a firm can identify customers willing to pay for ethical goods and if it can defend the resultant niche against imitators, business strategy in this context is like any other form of product differentiation, with the same basic economics (Reinhardt and Stavins, 2010): the opportunity arises because of asymmetric information, economies of scale, and intellectual-property protection.
A large number of articles consider CSR as a product differentiation strategy, with firms privately producing public goods to attract ethically oriented consumers. Arora and Gangopadhyay (1995) propose a standard model of vertical product differentiation to capture consumer heterogeneity in willingness-to-pay for environmental attributes. More recently, Besley and Ghatak (2007) examine the optimal level of CSR provision in competitive market equilibrium where CSR corresponds to the creation of public goods and curtailment of public bads jointly with the production of private goods, and firms compete for “ethical” and neutral consumers. They show that in equilibrium, firms sell both ethical and neutral brands, consumers self-select according to their valuation of the public good, and CSR creates a Pareto improvement (see also Baron, 2007; Becchetti et al., 2005; Graff Zivin and Small, 2005).
Empirically, opinion polls indeed tend to report an increasing concern for ethical consumption (De Pelsmacker et al., 2005). For instance, 46% European consumers claim to be willing to pay substantially more for ethical products (MORI, 2000). Consumer’s willingness to pay appears asymmetric between sinners and saints products (the former inducing stronger reactions) and dependent on the CSR issue tackled, product quality and individual factors (Sen and Bhattacharya, 2001). In the food sector, Giraud-Héraud and Hoffman (2010) point out how consumers might be willing to have safe and healthy food but are having difficulties to practically pay for it. Loureiro and Lotade (2005) also reveal using a face-to-face survey that consumers are willing to pay higher premiums for fair trade and shade grown coffee labels than for organic coffee.
From this perspective, labels and certification play a core role in product differentiation strategies to reduce information asymmetry. Indeed, Darby and Karni (1973) point out that when consumers cannot observe the quality of a firm product, there are strong incentives for opportunistic behavior, and the resulting equilibrium does not maximize social welfare. As they cannot be evaluated in normal use, as is the case of CSR, credence qualities need additional costly information for consumers to believe in them. Labels can be awarded by social activists, as in the signaling model of Feddersen and Gilligan (2001). For Baron (2010), various types of organizations providing assurance (certification) and information (social labels) on CSR have different impacts on free-riding. Social labels allow individuals with stronger moral preferences to separate from those with weaker moral preferences, but are not able to expand the scope of self-regulation beyond that with unconditional altruism. Certifications can do so and attract individuals with both stronger and weaker moral preferences. Illustrating this effect, Bjorner et al. (2004) followed a large panel of Danish consumers over 1997-2001 and quantified at +13-18% the price premium for certified (the Nordic Swan) toilet paper. In the same line, Eichholtz et al. (2010) assembled a sample of about 10 000 US office buildings and evaluated that “green” (energy efficiency) certification increased effective rents by 7% and selling prices by about 16%.

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CSR AND IMPERFECT MARKET STRUCTURES

We analyze in turn CSR determinants pertaining to competition intensity, reduction of production costs, entry barriers, and market opening following innovation.
Comparing examples of censured activities, Shleifer (2004) identifies that, when unethical behavior cuts costs, competition drives down prices and entrepreneurs’ incomes, thereby reducing their willingness to pay for ethical conduct. Thus unethical corporate behavior might arise from competition rather than pure greed. However, when firms compete for socially responsible consumers by linking the provision of a public good to sales of their private goods, social activities can become a by-product of product-market competition. Bagnoli and Watts (2003) hence theoretically show that the level of private provision of public good vary inversely with the competitiveness of the private-good market. Empirical support of this prediction is brought in Fernandez-Kranz and Santalo (2010)’s explicit test of the link between product market competition and CSR. They find that market concentration appears negatively related to environmental and social ratings and that increased competition due to higher import penetration leads to superior CSR performance. In the same line, Hull and Rothenberg (2008) also show that CSR most strongly affects performance in low-innovation firms and in industries with little differentiation.
Reducing production costs to increase profitability is another rationale of market pressure. The famous Porter’s hypothesis (Porter and Van der Linde, 1995) upholds that environmental regulation triggers innovation and production cost reduction (for instance increased input / output efficiency), leading to competitive advantage. Widely investigated, empirical evidence on Porter’s hypothesis appears mixed, as detailed in the thorough review of Ambec and Barla (2006). Margolis et al. (2009)’s meta-analysis concludes on a positive link between corporate environmental policies and profitability, driven by studies such as Derwall et al. (2005) that focuses on eco-efficiency. Nevertheless, recent works jointly taking into account multiple dimensions of CSR (environment, human resources, community involvements, etc.) contradict those findings (Barnett and Salomon, 2006; Brammer et al., 2006). More directly, Cerin (2006) heavily puts into question the theoretical fundamentals of the Porter’s hypothesis.
A related determinant of CSR activities lies in raising entry barriers and competitors’ costs. Enforced social or environmental corporate policies can raise regulatory barriers for firm competitors. An insightful path is opened by Chambolle and Giraud-Héraud (2005) who formalize product certification as a non-tariff barrier. By reducing competition intensity on the protected market, CSR entrance barriers can increase firm profitability. An illustration is recounted in Lyon and Maxwell (2008): the Florverde Program would have enabled the European cut flower market suppliers to be chosen based on pesticides use, thus inducing Columbian producers to promote environmentally friendly practices. However, empirical evidence beyond specific case studies is scarce in the literature.
The last element of competition related to CSR is innovation, which has been the focus of several empirical papers. Lanoie et al. (2011) use data on 4200 facilities in seven OECD countries and find strong support for environmental regulation stimulating environmental innovations. Wagner (2008) also finds that environmental management systems are associated with process innovation, while product innovations are more induced by information to consumers and eco-labeling. Based on survey data, Demirel and Kesidou (2011) show that eco-innovation is driven by the need for increased efficiency; whereas environmental regulation stimulates end-of-pipeline technologies and environmental research and development. Market innovation can also take social forms, as in the Bottom-of-the-Pyramid strategies. For instance, Murphy et al. (2012) highlight how firms can invest in social issues to prepare new market opportunities in emerging countries.

INFORMATION ASYMMETRY, REPUTATION AND GREENWASHING

Whereas ethical consumption and agent heterogeneity can ground product differentiation and strategic market competition, the credence good property of CSR makes it very dependent on information asymmetry and increases the risk of free-riding. However, free riding on CSR can turn out to be highly damageable for firm reputation.
As an increasing number of firms nowadays make a lot of effort to appear as socially responsible, many of them are criticized for being “greenwashers”. Greenwashing is a term generally used when significantly more money or time has been spent advertising being green (that is, operating with consideration for the environment), rather than spending resources on environmentally sound practices. Greenwashing in a sense echoes Bénabou and Tirole (2006)’s theory of pro-social behavior that combines heterogeneity in individual altruism and greed with concerns for social reputation. Those authors show how doubt is thus created about the true motive for which good deeds are performed, which can lead to a reduction of social welfare (the reputation-stealing effect). A theoretical model of greenwash has been proposed by Lyon and Maxwell (2011), who characterize it as the selective disclosure of positive information about a company’s environmental or social performance, while withholding negative information on these dimensions.
As put by Walley and Whitehead (1994), “it is not easy being green”. Indeed, if the consumer’s willingness to pay for CSR is insufficient, ethical standard adhesion costs represent a competitive disadvantage. An illustration is provided by Bagnoli and Watts (2003) who show that if conventional products are highly competitive with low prices, fewer consumers wish to buy “green”. Moreover, CSR being in essence a transparent activity, even if the early mover advantage does enhance profits, it soon erodes as competitive strategies copy it (Hoppe and Lehmann-Grube, 2001; McWilliams and Siegel, 2001). Beyond anecdotes, greenwashing has already been pinned down in a few empirical papers. In particular, Kim and Lyon (2008) compare voluntary disclosures of reductions of greenhouse gas emissions in the electric utility sector against actual emissions and demonstrate that, in the aggregate, the program had no effect on carbon intensity.
Yet protecting firm reputation is an important motive for CSR activities beyond greenwashing. Consumers’ memory can indeed be long-lasting. Kotler and Lee (2005) hence develop a framework that explains why charitable activities are good for business from a marketing perspective. Portney (2008) highlights that the firms’ belief that beyond compliance behavior will help curry favor with current and potential future customers is particularly true for firms in the food and consumer product businesses. Linking advertising, competition and CSR, Fisman et al. (2006) present a signaling model in which CSR may serve as a means of vertical differentiation in a market where quality is difficult to observe. Analyzing natural experiments on eBay where sellers offer identical products with and without charity donations, Elfenbein et al. (2009) observe behaviors in line with Fisman et al. (2006)’ predictions. Based on a sample of over 150,000 auctions, they observe that in the presence of little information about the reliability of a seller, charity commitments play a significant role in establishing trust. Also supporting Fisman et al. (2006)’s theoretical predictions, Brown et al. (2006) find that firms that advertise more intensively also give more to charity, while Hines and Ames (2000) report that 68% of interviewed consumers claimed to have bought a product or service because of a firm CSR reputation. CSR thus appears as a lever to build up firm reputation, considered as a strategic intangible asset.

Table of contents :

Introduction
What Are the Economic Determinants of CSR?
How Can Firms Succeed on Both Financial and Extra-Financial Levels?
Where Does the Private Equity Industry Stand in Terms of CSR, and Why?
Can Investors Rely on CSR to Identify Performing Firms?
Do Sustainable and Unsustainable Practices Impact the Access to Equity Financing?
1. The Economics of CSR: A Survey
1.1. Introduction
1.2. CSR as Externality Internalization and Public Good Provision
1.2.1. CSR, Public Politics and Regulation Preemption
1.2.2. CSR as a Response to Social Pressure and Private Politics
1.2.3. CSR, Altruism and Pro-social Behaviors
1.3. CSR as a Business Strategy in Imperfect Competition
1.3.1. CSR, Consumer Heterogeneity and Product Differentiation
1.3.2. CSR and Imperfect Market Structures
1.3.3. Information Asymmatry, Reputation and Greenwashing
1.4. CSR as Delegated Responsibility in Imperfect Contracts
1.4.1. CSR and Responsible Investors
1.4.2. CSR as Delegated Responsibility of Employees
1.4.3. CSR as the Delegated Responsibility of Firm Managers
1.5. CSR and Performance
1.5.1. CSR and Corporate Financial Performance
1.5.2. CSR and Extra Financial Performance
1.6. Conclusion
2. Doing Well and Doing Good: A Multi-Dimensional Puzzle
2.1. Introduction
Can Private Equity Funds Foster Corporate Social Responsibility?
2.2. Methodology
2.2.1. Basic Empirical Framework
2.2.2. Model Averaging and Thick Modelling
2.2.3. Inputs and Limits of the Approach
2.3. Data
2.4. Results
2.4.1. CSR Policies Do Not Equally Matter to Do Well and Do Good
2.4.2. Good Business Behaviors with Customers and Suppliers Remain Core
2.4.3. Coexistence of CSR Policies With and Without Optimal Level
2.4.4. Results Robustness
2.4.5. Implications for Corporations Seeking to Do Well and Do Good and For Public Policies
2.5. Conclusion
3. Think Global, Invest Responsible: Why the Private Equity Industry Goes Green
3.1. Introduction
3.2. Private Equity and Responsible Investment: Where Do We Stand?
3.2.1. The Socially Responsible Investment Concept, from Margin to Mainstream
3.2.2. The Surge and Crisis of the Private Equity Industry
3.2.3. Integration of Socially Responsible Practices by Private Equity Investors
3.3. Testable Hypotheses on Characteristics and Drivers of the Responsible Investment Movement in Private Equity
3.3.1. Hypotheses on the Characteristics of Socially Responsible Private Equity
3.3.2. Hypotheses on Strategic Drivers of Socially Responsible Private Equity
3.3.3. Hypothesis on Responsive Drivers of Socially Responsible Private Equity
3.4. Data and Method
3.4.1. The French Private Equity Industry
3.4.2. Sampling and Structural Data
3.4.3. Survey Data
3.5. Multivariate Empirical Analysis
3.5.1. Results on Characteristics of Socially Responsible Private Equity
3.5.2. Results on Strategic Drivers of Socially Responsible Private Equity
3.5.3. Results on Responsive Drivers of Socially Responsible Private Equity
3.5.4. Limits of the Analysis and Further Research Paths
3.6. Discussion
3.6.1. Socially Responsible Private Equity: Responsive or Strategic?
3.6.2. Socially Responsible Private Equity: Engagement or Activism?
3.6.3. Socially Responsible Private Equity: A Stronger Impact than Public Investors
3.7. Conclusion
4. Green Signaling in Experimental Private Equity Negotiations
4.1. Introduction
4.2. Model
4.2.1. Notations
4.2.2. Strategies and Beliefs
4.2.3. Equilibrium Characterization
4.3. Experimental Design
4.3.1. Model Parameters
4.3.2. Equilibrium Predictions
4.3.3. Behavioral Conjecture: Green Versus Brown Signals
4.4. Experimental Procedure
4.5. Results
4.5.1. Results for Prediction 1: Pooling Equilibrium in the Absence of Money Burning Opportunities
4.5.2. Results for Prediction 2: Pooling Equilibrium in Presence of Expensive Money Burning Opportunities
4.5.3. Results for Prediction 3: Equilibrium in Presence of Cheap Money Burning Opportunities
4.6. Discussion
4.6.1. The Money Burning Signal Content Impacts Equilibrium Selection
4.6.2. Green Signals Increase Type Revelation Without Being Used
4.7. Conclusion
5. The Price of Unsustainability: An Experiment with Professional Private Equity Investors
5.1. Introduction
5.2. Experimental Design and Procedures
5.2.1. Design
Can Private Equity Funds Foster Corporate Social Responsibility?
5.2.2. Procedures
5.2.3. Incentives Mechanism
5.3. Results
5.3.1. Participants’ Profile
5.3.2. Results on Firm Valuation
5.3.3. Results on Investors’ Investment Decisions
5.4. Discussion
5.4.1. Sustainability and Private Equity investors
5.4.2. Sustainability and Entrepreneurs
5.5. Conclusion
Conclusion
Main Findings
Implications for Private Equity Investors
Implications for Public Policies
Limits and Further Research Paths
References

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