Is Sin Always a Sin? The Interaction Effect of Social Norms and Financial Incentives on Market Participants’ Behavior

Using alcohol, tobacco, and gaming consumption data and people’s attitudes toward these sin products to proxy for social norm acceptance levels, we show a strong interaction effect between social norms and financial incentives, which significantly influence the behavior of market participants. Speci...

Full description

Saved in:
Bibliographic Details
Main Authors: LIU, Yanju, LU, Hai, VEENSTRA, Kevin
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2014
Subjects:
Online Access:https://ink.library.smu.edu.sg/soa_research/1263
https://ink.library.smu.edu.sg/context/soa_research/article/2262/viewcontent/SSRN_id2419667.pdf
Tags: Add Tag
No Tags, Be the first to tag this record!
Institution: Singapore Management University
Language: English
Description
Summary:Using alcohol, tobacco, and gaming consumption data and people’s attitudes toward these sin products to proxy for social norm acceptance levels, we show a strong interaction effect between social norms and financial incentives, which significantly influence the behavior of market participants. Specifically, institutional investors’ shareholdings and analyst coverage of sin companies increase with the degree of social norm acceptance. The association between shareholdings/coverage and social norm acceptance is less pronounced for firms with higher future expected performance. Our results show that social norms and financial incentives have a powerful interaction effect in determining the behavior of market participants, suggesting that social norms can be crossed when motive and opportunity exist