www.palgrave-journals.com/fsm/
© 2009 Palgrave Macmillan 1363-0539
Journal of Financial Services Marketing
INTRODUCTION
Investing is a goal-directed activity. Most
investors seek to satisfy multiple economic
goals such as maximizing return on
investment (ROI), saving for retirement
and increasing personal wealth, among
others. An emerging breed of socially
responsible (henceforth SR) investors also
embrace a number of social goals, including
Correspondence:
Rajiv Kashyap
Cotsakos College of Business, William Paterson University,
1600 Valley Road, Wayne, NJ 07470
E-mail: KashyapR@wpunj.edu
protecting the environment, advancing social
causes and agendas and censuring socially
irresponsible fi rms. In light of these multiple
and often confl icting aspirations, there are
bound to be differences in importance given
to various investing objectives. We highlight
differences in individual values and attitudes
and relate them to investors ’ economic
investing goals (EIG) and social investing
goals (SIG). In this study, we specifi cally
model the interdependence of EIG and
SIG to provide a richer description of the
investing process. Finally, we identify new
research prospects and discuss the managerial
implications of our fi ndings.
Original Article
Not everybody wants to save
the world
Received (in revised form): 6 th April 2009
Rajiv Kashyap
is Professor of Marketing, and the Interim Associate Dean of the Cotsakos College of Business at William Paterson University, NJ.
After obtaining a BS degree from Bombay University, he earned a MS and PhD in Marketing from the University of Massachusetts,
Amherst. His research interests cover social marketing and strategic marketing issues. His research has been published in the
Journal
of Marketing
, Academy of Marketing Science Review , the Journal of Consumer Behavior , the International Journal of Market Research ,
Academy of Management Learning and Education
, among others.
Easwar S. Iyer
is Professor of Marketing and Head of the Marketing Department in the Isenberg School of Management at the University of
Massachusetts, Amherst. He earned his undergraduate degree in Mechanical Engineering from the Indian Institute of Technology,
Madras, and followed that with an MBA from the Indian Institute of Management, Calcutta. After working for a number of years he got
his PhD in Marketing from the University of Pittsburgh. He is primarily interested in the interface between social responsibility and
business practice, and has published in many leading marketing journals.
ABSTRACT A consumer lens is used to examine investing behavior in this study. The
study focuses on the importance given by investors to their economic and social investing
goals (SIG). This approach redirects managerial attention from the
investment to the
investor
and investing goals . The study fi nds that differences in environmental attitude,
social investing effi cacy, materialism, religiosity and protected values can explain
disparities in investing goals. The fi ndings suggest a segmentation approach based on
differences in antecedent effects and economic
and SIG.
Journal of Financial Services Marketing
(2009) 14, 118 – 134. doi: 10.1057/fsm.2009.12
Keywords
social investing goals ; segments ; values
© 2009 Palgrave Macmillan 1363-0539
Journal of Financial Services Marketing Vol. 14, 2, 118–134 119
Not everybody wants to save the world
INVESTING AS CONSUMPTION
We study investing from a consumption
perspective to shed light on the motives
and goals that underlie investing behavior.
Extant research in fi nance comparing the
performance of SR mutual funds to their
‘ regular ’ counterparts is useful only to
develop benchmarks and comparisons. Even
recent developments in behavioral fi nance
have focused on
investments – by clarifying
the effects of biases in investor decisions
to explain market anomalies such as arbitrage
and mis-priced assets.
1 Not much is known
about
investors , that is, who buys these
products. Further, the focus on the
investment
has drawn attention away from the act
of
investing , thereby concealing important
sources of explanation, that is,
why do
investors buy these products. In other words,
very little is known about the
customers and
their
motivations . This lacuna has prompted
some to express surprise that ‘ consumer
research has paid so little attention to
consumers ’ investment decisions ’ .
2 Yet
others have argued that investor behavior
is essentially ‘ consumer behavior for a
particular, and particularly important,
product category ’ .
3 To get answers to
these important questions, we surveyed
348 investors. Our primary focus is to
explain the relationships between individual
difference variables and investors ’ SIG
and EIG.
There is a long-standing view that a fi rm ’ s
responsibility is like a pyramid starting
from basic economic responsibilities, moving
up to the legal and ethical responsibilities,
with discretionary responsibilities being
the topmost.
4 This model is equally
applicable to consumer investing behaviors.
We propose that people have different
investing goals – economic and social –
when choosing a fund, which will be
differentially weighted. The relative emphasis
placed on these goals will likely vary
between different categories of investors.
In particular, we expect SR investors to
be more infl uenced by their moral and
ethical beliefs, and share values that are
different from average investors. We also
expect that a host of other values and beliefs
including environmental attitude (EA),
social investing effi cacy (SIE), religiosity,
materialism and protected values (PV)
will infl uence their investing goals.
5 In the
ensuing sections we identify and elaborate
on characteristics that we believe will help
distinguish between the emphases that
investors place on EIG and SIG. We then
describe our survey and how it was
administered. Finally, we present our results
that suggest a segmentation approach, and
discuss its implication for fund managers
and researchers.
Investing goals
Individuals have goals, although fuzzy, when
choosing a mutual fund. In the broadest
sense, goals have been described to include
maximizing
gains and minimizing losses . Such
a broad dichotomy is not very useful because
the dimensions on which gains and losses
are measured are not specifi ed. In this paper,
we consider two dimensions for these goals –
economic and social. Economic goals most
often cited by investors include maximizing
returns, increasing fi nancial wealth,
6 achieving
returns relative to standard benchmarks and
personal satisfaction.
7 Investors who give
greater importance to the above-mentioned
goals are referred to as Economically
Responsible (henceforth ER) in contrast to
others who will be referred to as non-ER
investors. ER investors are usually considered
to be more knowledgeable about the
investing process and fi nancial markets.
SR investors tend to have three important
goals: (1) to boycott fi rms deemed socially
irresponsible; (2) to promote environmental
causes; and (3) to advance social agendas,
5,6,8
whereas non-SR investors do not subscribe
to these three goals. SR investors tend to
boycott socially irresponsible companies;
this is usually determined on the basis
of personal moral philosophy and ethical
120
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 2, 118–134
Kashyap and Iyer
principles. Although not likely to infl uence
company conduct or affect stock prices,
9,10
this satisfi es investors ’ needs for consistency
between personal values and investing
behavior.
11 Also, investors are more likely
to punish fi rms for irresponsible conduct, as
negative information generally has a greater
psychological impact. This explains the
wide proliferation of negative screens in the
SR investor community. Environmental
protection remains a top priority for SR
investors.
12 In response to this concern, fi rms
have adopted triple bottom line accounting
approaches to report the economic, social
and environmental impacts of their business
operations. Finally, SR investors aim to
advance social agendas. Although individual
edicts vary, most can be expected to favor
progressive corporate practices in regard
to corporate governance, employment
and community development. Advancing
social agendas implies greater proactiveness,
including attempts to engage and infl uence
companies through shareholder resolutions,
e-mail campaigns and annual-meeting
protests.
Previous research has focused on economic
or SIG in isolation, ignoring the potential
for each to infl uence the other. Researchers
have speculated that some investors might
be willing to sacrifi ce economic gains to
achieve social gains (p. 21).
5,7 Beal, Goyen
and Phillips (p. 76)
7 suggest that SR
investing provides psychic benefi ts that
may compensate for loss of returns. On
the other hand, some researchers have
suggested that investors would do well
to focus on SIG, as SR funds tend to
outperform standard benchmarks.
13 This
mixed evidence leads us to suggest the
following non-recursive relationship
between EIG and SIG:
Hypothesis 1a:
Economic investing goals
will infl uence social investing goals.
Hypothesis 1b:
Social investing goals will
infl uence economic investing goals.
VALUES AND ATTITUDES THAT
INFLUENCE EIG AND SIG
Calls for research to link consumer values
and dispositions to SR investing
14 have
largely been unattended. Based upon
previous qualitative work consisting of depth
interviews with investors, we identifi ed the
following constructs to distinguish between
SR and ER investors: EA, religiosity,
materialism, PV and SIE. In order to study
the differential infl uence of these antecedents,
we divide investors into groups based on
the relative importance attached to EIG
and SIG as follows: high versus low ER
and high versus low SR investors.
Environmental attitude
Carson ’ s
15 eye-opening description of the
enormous impact of human activities on
the natural environment persuaded a number
of people to modify their own consumption
behaviors. ‘ EA ’ is shaped by beliefs about
the interaction between an individual and
the natural environment. It motivates
behaviors such as purchasing environmentally
friendly products,
16 buying from food
cooperatives
17 and recycling. 18 Henion 19
defi ned one ‘ whose values, attitudes,
intentions or behaviors exhibit and refl ect
a relatively consistent and conscious concern
for the environmental consequences related
to the purchase, ownership, use or disposal
of particular products or services ’ as an
ecologically concerned consumer
. For the next
two or three decades, even as this
burgeoning segment grew in size and
importance, most research was premised
on the assumption that these consumers
would react favorably to environmentally
friendly products and services. In other
words, it was presumed that businesses
would seize opportunities to serve this
segment by developing appropriate offerings.
Only recently have researchers recognized
that many in this segment are more
proactive and ready to accept responsibility
for their personal actions.
20 Kashyap
et al
20 proposed the concept of individual
© 2009 Palgrave Macmillan 1363-0539
Journal of Financial Services Marketing Vol. 14, 2, 118–134 121
Not everybody wants to save the world
environmental responsibility
, one that shifts
the focus from concern and reactivity to
responsibility and proactivity. Thus,
environmentally responsible consumers do
not merely wait for new environmentally
friendly offerings to be made available to
them, they proactively engage businesses.
Investing in funds that steer money away
from certain businesses and towards others
refl ects an investor ’ s deep commitment to
the environment – it would be one of the
most profound proactive behaviors. Hence,
we expect that
Hypothesis 2:
Environmental attitudes will
have a greater infl uence on the SIG of
SR investors than non-SR investors.
Materialism
Materialism
is defi ned as the value that
governs the role of material possessions in
one ’ s life.
21,22 Individuals often use their
possessions to refl ect themselves and their
values. As Richins (p. 522)
22 points out,
‘ a man whose most valued possessions are
a Bible and his wedding ring differs in
many ways from one who cares about his
snowmobile and hunting rifl es ’ . People use
their material possessions, whether it is the
clothes they wear or the car they drive,
to express their personal values. Richins
22
identifi ed three dimensions of materialism:
success, centrality and happiness. First,
material possessions are often used to signal
prestige and success. Materialistically driven
investors view investments as vehicles to
acquire possessions that can confer desired
status. Second, the act of investing increases
investor involvement in wealth creation.
Thus, investing becomes a core activity
and occupies a central role in the lives of
materialistic investors. Finally, materialistic
investors derive happiness from their quest
for material possessions. Their ‘ pursuit
of happiness ’ is inexorably tied to the
ability to buy more and better quality
products than they can afford at present.
Investing provides an opportunity to
pursue this materialistic quest. Therefore,
we expect that
Hypothesis 3:
Materialism will have a greater
infl uence on the EIG of ER investors
than non-ER investors.
Religiosity
People allow their religious beliefs to
infl uence a number of behaviors.
23 Religiosity
is the degree to which an individual is
committed to a set of religious beliefs and
the degree to which it infl uences her / his
attitudes and behaviors.
24 The infl uence of
religiosity on social mores varies from society
to society as also from individual to
individual. The effects of religiosity generally
take the form of disapproval of behaviors
that are discouraged and punished, or
approval of behaviors that are encouraged
and rewarded. It is widely known that
consumption of pork is disallowed in the
Jewish and Moslem religions as is the
consumption of beef in the Hindu religion.
On the other hand, most religions encourage
charitable giving to the needy and poor.
The effects of religiosity pervades across
various behaviors, including shopping,
25
students ’ attitudes,
26 delinquency 24 and
investing.
27
Our concern is restricted to understanding
whether and how religiosity infl uences
investing decisions and behaviors. The
interaction between religiosity and people ’ s
pocket books can be traced to the ancient
practice of tithing. In this ‘ approved ’
behavior, people were encouraged to offer
a ‘ voluntary ’ contribution of an amount
roughly equal to 10 per cent of one ’ s earning
to the religious organization. As most
religious organizations did not have much
revenue generating capability, tithing was
encouraged. However, the idea that one ’ s
religious beliefs infl uence investing decisions
is slightly more modern. For instances of
that we will have to go back 200 odd years
122
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 2, 118–134
Kashyap and Iyer
to the Quakers, who allowed their religious
beliefs to govern their investing decisions
by refusing to invest in businesses they
thought as profi ting from war or slavery.
27
This movement, at least in the United States,
gathered momentum in the 1960s that
represented the fi ery days of civil rights
marches, anti-Vietnam protests and
disinvestment in South Africa.
28 Some have
suggested that Friedman ’ s famous dictum in
our opening line may have been an attempt
to counter the trend of mixing business
issues with social responsibility.
24 In any
case, today people freely allow their
religiosity to interact with their investing
goals and decisions. As a result, we expect
investors who emphasize social goals to
be infl uenced by religiosity more than the
average investor. We also expect that ER
investors will be more likely to be infl uenced
by religious principles that encourage
investors to attend to investing decisions and
adopt systematic risk to maximize returns.
29
Hypothesis 4:
Religiosity will have a greater
infl uence on the SIG of SR investors
than non-SR investors.
Protected values
PV have been defi ned as ‘ those that resist
trade-offs with other values, particularly
economic values ’ .
30 For instance, some
people believe that no amount of benefi t
(for example, lower taxes, cheaper gas) can
compensate for the possible extinction
of animal species in the Alaskan wildlife
refuge because of drilling by oil companies.
Examples of PV include the sanctity of
human lives, the universality of human
rights and protection of the natural environment
among others. PV pose problems
for contingent valuation approaches (that is,
use of willingness to accept / pay for social
problems / benefi ts), as they are assigned
infi nite values by those who hold them.
The study of PV is especially important
in the present context because of confl icts
between economic and social goals for
some investors. Note that PV originate from
rules that forbid certain types of behaviors
rather than from evaluations of likely
outcomes. For example, many investors
choose to resist investing in tobacco companies
regardless of the size of returns. In
addition, PV are more readily apparent in
acts of commission rather than omission.
31,32
This suggests that investors are more likely
to invoke these values when they perceive
that company behavior violates their
principles (for example, by marketing
products that harm the environment) rather
than by their failure to act (for example,
by not adopting recycling technologies).
We adapted PV theory to empirically test
differences between the investor segments
profi led earlier. Specifi cally, we used the
most common screening criteria employed
by fund managers to develop a census of
inviolable acts, including manufacturing or
marketing fi rearms, alcoholic beverages,
environmentally unfriendly products, pornography
and tobacco products; operating
nuclear power plants, casinos and gambling
businesses; and committing tax fraud.
In light of the importance attached to
SIG by SR investors, one would expect that
PV would have a greater infl uence on their
SIG. More formally, we propose that
Hypothesis 5:
Protected values will have
greater infl uence on the SIG of SR
investors than non-SR investors.
Social investing effi cacy
In his seminal work on Protection Motivation
Theory, Rogers
33 showed the
signifi cance of effi cacy in bringing about
attitudinal and behavioral changes. The role
of effi cacy in explaining altruistic behavior,
34
health-related choices,
35,36 making and
keeping resolutions and environmentally
responsible behaviors
37,38 has been well
studied, although results have been ambivalent.
Some fi nd that it played a role in healthrelated
choices,
35 whereas others did not
© 2009 Palgrave Macmillan 1363-0539
Journal of Financial Services Marketing Vol. 14, 2, 118–134 123
Not everybody wants to save the world
see its impact in goal setting.
36 The mixed
fi ndings could simply be the result of not
clearly specifying the domain of the outcome.
To ensure that effi cacy is specifi c to our
context, we proposed and measured the
concept of SIE. ‘ SIE ’ is the assessment an
individual makes of the likelihood that
his / her investment will lead to the desired
social outcome or at least increase the
probability of the desired outcome.
39 It has
been shown to be a signifi cant moderator in
case of helping behaviors, in general, and
charitable giving,
40 in particular.
Perception of high effi cacy (
I can do
something about it
) gives people a greater sense
of confi dence, thus vitiating the need to
carefully process any incoming information.
Gleicher and Petty
41 call this cognitive
reassurance, and suggest that effi cacy could
produce such a degree of confi dence as to
make people completely avoid information
processing lest they fi nd information that is
at odds with their beliefs. Effi cacy is also
related to a belief about one ’ s own
capabilities to infl uence an outcome. Thus,
while effi cacy can increase one ’ s belief in an
action thereby increasing the probability of
engaging in that behavior, it could also be
harmful to the extent that it may impede a
thorough processing of information. All in
all, we believe that a domain-specifi c
measure of effi cacy (SIE) will have a
signifi cant impact, and hence propose that
SR investors will have a higher sense of SIE
as compared to non-SR investors. Therefore,
Hypothesis 6:
Social investing effi cacy will
have a greater infl uence on the SIG of
SR investors than non-SR investors.
METHOD
We used a direct collection method to
gather our sample. Students at two public
universities were trained to administer the
questionnaire and assigned the responsibility
of recruiting investors in two different
northeastern states. Each interviewer was
required to obtain at least three responses. In
all, 81 interviewers collected 348 responses at
an average of 4.3 responses per interviewer.
We provided student researchers with a set
of guidelines to ensure consistency in the
data collection process. Each student was
instructed to identify eight potential
respondents, excluding family, who were
responsible for making personal investment
decisions. The students initially provided us
with lists of respondents, including details of
age, occupation and a telephone contact
number. These lists were carefully examined
to avoid potential duplication and to ensure
that no respondent completed more than one
survey. Students were instructed to qualify
respondents on the basis of years of investing
experience and net portfolio value. To be
included in the sample, each respondent had
to meet two criteria: (1) three years of
investing experience and (2) a portfolio
worth at least US $ 5000. A month after the
survey was completed, a random sub-sample
of 40 respondents (10 per cent of sample)
was contacted to reconfi rm that the
respondents satisfi ed the eligibility criteria
and to ensure the integrity of the data
collection process. Although we may have
disproportionately sampled the population of
investors, this does not unduly bias our
fi ndings, as we focus on relationships among
variables and are guided by
a priori
hypotheses.
42
Our sample consisted of 204 males and
144 females ranging in age from 25 to 88
years, with a median age of 45 years. Nearly
80 per cent had at least a college degree.
Seventy-four per cent of them were White,
whereas Blacks (8.4 per cent), Hispanics (8.6
per cent) and Asians (9.5) accounted for the
remainder. A comparison of sample
demographic characteristics with a national
profi le of investors shows that our sample
was consistent in terms of age and
investment experience, but refl ected the
greater racial diversity and higher education
and income one would expect in the
Northeastern United States. Data were
124
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 2, 118–134
Kashyap and Iyer
obtained from the Investment Company
Institute ’ s 2007 Investment Company
Factbook.
43
We used 7-point Likert scale anchored
at ‘ Strongly Disagree ’ and ‘ Strongly Agree ’
to measure the constructs of interest. Scales
used to measure materialism and religiosity
scales were adapted from previous research.
The rest were developed for the purpose
of this study. Details are provided in the
appendix. A three-item scale measured the
extent to which investors sought to achieve
their social goals through investing choices.
This was conceived as a formative scale.
Face validity was independently assessed by
experts conducting similar types of research.
A four-item scale measured the importance
given to economic goals (Cronbach ’ s
alpha = 0.69). We categorized the respondents
into four segments based on their scores
on the economic and social goals measures.
Specifi cally, we parsed the data and
eli minated all respondents whose responses
fell into the middle tercile of the social or
the economic goals categories (
n = 151,
43.4 per cent of total sample). This ensured
greater contrasts between high and low score
respondents. We also conducted an analysis
by segmenting the sample based on quartiles,
that is, comparisons of the uppermost and
lowermost quartiles, and found an identical
pattern of results. Then, based upon their
score on EIG (that is, low < = 20 or high
> = 23) and SIG (that is, low < = 10 or
high > = 13), they were assigned to either
high or low economic (EIG) or SIG groups.
Of the 197 respondents, 89 fell into the
high EIG and 108 into the low EIG group.
The same subset was also divided on the
basis of SIG with 99 respondents in the
high SIG and 98 in the low SIG group.
The independent measures of EA,
religiosity, materialism and SIE were subjected
to reliability analysis, and scale items with low
item-to-total correlations were dropped. Next,
we estimated two confi rmatory factor analysis
models to assess construct reliabilities and
validities (see Table 1 ).
The fi rst model was used to refi ne the
scales measuring EA, investing effi cacy
and religiosity (
2 = 123.6, 51 df, P < 0.00,
RMSEA = 0.07, CFI = 0.97, AGFI = 0.89).
The second CFA model was used to assess
the validity of the materialism scale that was
adapted from Richin ’ s short version,
22 with
success, centrality and happiness as the three
dimensions (
2 = 40.7, 11 df, P < 0.0,
RMSEA = 0.08, CFI = 0.95, AGFI = 0.95).
Both models showed acceptable fi t after
items that loaded poorly were eliminated.
The fi nal measures were
reliable as evidenced
by composite reliabilities ranging from 0.72
to 0.92 and
valid as per the Average Variance
Extracted measures of 0.50 and higher
(pp. 777 – 778).
44 Discriminant validity was
confi rmed by the fi nding that the variance
extracted for each pair of constructs was
higher than the squares of the correlations
between the constructs. We measured the
number of PV by computing respondent
scores (Yes = 1 and No = 0) to questions
about their intentions to boycott companies
that performed any of the controversial
behaviors mentioned earlier.
Next, we conducted multigroup path
analysis (see Table 2 ) to contrast the paths
from the individual difference variables
to the investing goals among high and low
SIG groups.
We began by estimating an
Overall Model
(
2 29 df = 45.5, P < 0.03) with the pooled
sample in which the individual difference
variables were regressed on EIG and SIG.
Next, we estimated the
Unrestricted Model I
in which we allowed coeffi cients to differ
between groups (
2 19 df = 24.5, P < 0.18).
Based on signifi cant paths, we pared this
model to obtain the
Unrestricted Model II .
This model had a good fi t (
2 25 df = 25.1,
P
< 0.46). Next, we reduced this model to
the
Final Mixed Model I by progressively
constraining each path coeffi cient to be
equal in both groups and checking for
deterioration in model fi t. The fi t of the
Final Mixed Model I
was very good
(
2 27 df = 26.5, P < 0.49, RMSEA = 0.0,
© 2009 Palgrave Macmillan 1363-0539
Journal of Financial Services Marketing Vol. 14, 2, 118–134 125
Not everybody wants to save the world
CFI = 0.99, TLI = 0.98). Next, we used a
similar process to study the infl uence of the
antecedent variables on the high and low
EIG groups. Note that we constrained the
path from SIG to EIG to be equal in both
groups as per our fi nding in the
Final Mixed
Model I
(see Table 2 ). We allowed the errors
of SIG and EIG to correlate as suggested by
modifi cation indices. The model showing
the differential effects of the antecedents
on high and low EIG groups is denoted
as
Final Mixed Model II. This model had
an acceptable fi t (
2 19 df = 27.5, P < 0.09,
RMSEA = 0.07, CFI = 0.95, TLI = 0.92).
Together
Final Mixed Models I and II allowed
us to test the hypotheses proposed earlier.
We limit our discussion to direct effects for
the purpose of brevity.
We found partial support for Hypothesis 1a
and full support for Hypothesis 1b. In the
Final Mixed Model I comparing high and
low SIG groups, the path from EIG to SIG
was not signifi cant in the low SIG group.
In the Final Mixed Model II comparing
high and low EIG groups, the same
path (EIG
→ SIG) was signifi cant ( − 0.39,
t
-value = − 1.78) at P < 0.10 (two-tailed) in the
low EIG group. We found signifi cant paths
from SIG to EIG in both groups ( − 0.44,
t
-value = − 2.97 in the Final Mixed Model I
and − 0.39,
t -value = − 3.27 in the Final
Mixed Model II) and both models. In sum,
the fi ndings provide adequate support for the
proposed non-recursive relationship. Next,
we found no support for the hypothesized
differential relationship between EA and
SIG (as per Hypothesis 2) In fact, we found
that the path from EA
→ SIG was signifi cant
(0.29,
t -value = 2.16) in the low SIG group.
We found that that materialism (M) was
Table 1 :
Confi rmatory factor analysis with standardized factor loadings, composite reliabilities and average variance
extracted
CFA Model 1 CFA Model 2 Materialism
Environmental
attitude
Social investing
effi cacy
Religiosity M1 success M2 happiness M3 centrality
EA1 0.84 — — — — —
EA2 0.64 — — — — —
EA3 0.70 — — — — —
SIE1 — 0.81 — — — —
SIE2 — 0.84 — — — —
SIE3 — 0.67 — — — —
SIE4 — 0.77 — — — —
C1 — — — — — —
C2 — — — — — —
C3 — — — — — —
C4 — — — — — —
R1 — — 0.65 — — —
R2 — — 0.76 — — —
R3 — — 0.91 — — —
R4 — — 0.89 — — —
R5 — — 0.70 — — —
M11 — — — 0.84 — —
M12 — — — 0.86 — —
M13 — — — 0.68 — —
M21 — — — — 0.61 —
M22 — — — — 0.70 —
M31 — — — — — 0.96
M32 — — — — — 0.40
Reliability 0.77 0.86 0.89 0.72
a
AVE 0.54 0.60 0.62 0.50
a
a
Refers to weighted average reliability and variance extracted.
Model 1
2 = 123.6 (51 df, P < 0.0), RMSEA = 0.07, CFI = 0.97, AGFI = 0.89.
Model 2
2 = 40.7 (11 df, P < 0.0), RMSEA = 0.08, CFI = 0.95, AGFI = 0.95.
126
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 2, 118–134
Kashyap and Iyer
Table 2 :
Multigroup path analysis of socially responsible and non-responsible investor groups
Path Overall
model
Unrestricted Model 1 Unrestricted Model 2 Final Mixed Model I Final Mixed Model II
High SIG
group
Low SIG
group
High SIG
group
Low SIG
group
High SIG
group
Low SIG
group
High EIG
group
Low EIG
group
EA
→ SIG 0.13 * (1.73) 0.00 (0.03) 0.25 (1.69) 0.00 (0.02) 0.25 (1.80) 0.004 − 0.04 0.29 (2.16) — —
M
→ EIG 0.27 (4.11) 0.69 (4.04) 0.18 (1.19) 0.40 (4.22) 0.18 (1.28) 0.64 (4.22) 0.11 (1.12) 0.18 † (1.80) 0.18 † (1.80)
R
→ SIG 0.00 (0.13) − 0.03 ( − 0.44) − 0.03 ( − 0.27) 0.26 (1.90) − 0.04 ( − 0.31) 0.24 † (1.81) − 0.01 ( − 0.04) 0.01 (0.53) 0.39 (3.39)
PV
→ EIG − 0.10 ( − 0.47) 0.04 (0.27) − 0.06 ( − 0.28) — — — — 0.18 (2.35) 0.11 (1.15)
PV
→ SIG 0.18 (2.67) 0.22 (1.91) 0.29 (2.42) 0.29 (2.60) 0.22 (0.92) 0.25 (3.05) 0.08 (1.05) — —
SIE
→ SIG 0.16 (4.07) 0.68 (4.81) 0.11 (0.93) 0.66 (5.11) 0.11 (0.91 ) 0.30 (5.03) 0.11 (0.94) 1.08 (3.55) 0.29 † (1.69)
SIG
→ EIG − 0.47 ( − 1.23) − 0.54 ( − 2.95) − 0.20 ( − 0.46) − 0.51 ( − 3.22) − 0.24 ( − 0.96) − 0.44 ( − 2.97) − 0.44 ( − 2.97) − 0.39 a ( − 3.27) − 0.39 a ( − 3.27)
EIG
→ SIG 0.08 (0.99) 0.68 (3.05) 0.01 (0.16) 0.64 (4.29) 0.02 (0.10) 0.61 (4.00) 0.15 (0.89) 0.45 (3.29) − 0.39 † ( − 1.78)
P
value 0.03 0.18 0.46 0.49 0.09
RMSEA
0.08 0.05 0.01 0.00 0.06
CFI, TLI
0.86, 0.81 0.95, 0.89 0.99, 0.98 0.99, 0.98 0.95, 0.92
a
Denotes fi xed path as per Final Mixed Model I.
*Note that we report standardized coeffi cients to facilitate model comparisons.
Numbers in parentheses represent
t -values. Bold numbers indicate signifi cant paths, two-tailed ( P < 0.05) with the exception † P < 0.10.
Abbreviations
: EA – Environmental Attitude, M – Materialism, R – Religiosity, PV – Protected Values, SIE – Social Investing Effi cacy, EIG – Economic Investing Goals, SIG – Social Investing Goals.
© 2009 Palgrave Macmillan 1363-0539
Journal of Financial Services Marketing Vol. 14, 2, 118–134 127
Not everybody wants to save the world
positively related to EIG in both EIG groups
(0.18,
t -value = 1.80). We did not fi nd
support for a differential effect as we had
expected (Hypothesis 3). Also, we found
support for the proposed infl uence of
religiosity (R) on SIG as per Hypothesis 4
(0.64,
t -value = 4.22). Hypothesis 5 was
supported by the fi nding of a signifi cant
path from PV to SIG (0.25,
t -value = 3.05)
in the high SIG group and a non-signifi cant
path in the low SIG group. Finally, we
found support for Hypothesis 6 with
a signifi cant path (0.30,
t -value = 5.03) from
SIE to SIG in the high SIG group and
a non-signifi cant path in the low SIG group.
In addition to the above paths, we also
found a signifi cant path (0.39,
t -value = 3.39)
from religiosity to SIG in the low EIG
group, PV to EIG (0.18,
t -value = 2.35)
in the high EIG group, and SIE to EIG
in high (1.08,
t -value = 3.55) and low (0.29,
t
-value = 1.69) EIG groups, respectively.
Collectively, these fi ndings suggest a segmentation
approach that capitalizes on the
interplay between EIG and SIG.
DISCUSSION AND
MANAGERIAL IMPLICATIONS
The problem of determining
what is SR is
considered the ‘ holy grail ’ in social responsibility
research owing to lack of consensus
about defi nitions and metrics. Our approach
shifts the onus and attention from this
managerial dilemma to the antecedent factors
that infl uence investor expectations of social
responsibility. Our fi ndings suggest that
investors ’ SIG and EIG are interdependent.
Our approach provides a different tack on
the problem and generates rich psychological
insights to help refi ne segmentation strategies,
and improve customization and relationship
building efforts. Further, the differential
effects of antecedents on investing goals
suggest that investors can be segmented
along these goal dimensions. A simple
typology based upon the fi ndings of our
two models is presented below.
Investors can be segmented based on
the relative importance they assign to their
economic and social goals. They may be
divided into four groups based on the
emphasis they place on economic goals
(high-low) and social goals (high-low)
(see Table 3 ). Each segment is labeled in
a manner that refl ects the importance
attached to the two types of goals and
the antecedent infl uences. Of the 197
respondents in the analysis sample, 48 (24.4
per cent) were classifi ed as Unconcerneds,
41 (20.8 per cent) as Profi teers, 42
(21.3 per cent) as Bleeding Hearts and
66 (33.5 per cent) as Sustainers.
Sustainers: High importance
on economic and social goals
Sustainers seek to jointly maximize their
individual economic and collective social
goals. Sustainers are likely driven by
materialistic values, as the paths from
materialism to EIG were signifi cant in both
SIG and EIG groups. This modern approach
to social responsibility asserts that in the
long run, the creation of wealth and the
Table 3 :
Investor segments based upon importance of economic and social goals
Importance given to economic goals
ER Investors Non-ER investors
Importance given to social goals
High Low
SR investors High Sustainers Bleeding Hearts
Non-SR investors Low Profi teers Unconcerneds
128
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 2, 118–134
Kashyap and Iyer
fulfi llment of social goals naturally occur
together. This is further borne out by the
nature of the relationship between EIG
and SIG. In both high SR and high ER
groups, the paths from EIG to SIG are
positive. Sustainers recognize that higher
SIG may lead to lower investing economic
goals, but higher economic goals may also
raise SIG. Such behavior refl ects the consumption
behavior of refl exive consumers.
45
Refl exive consumers adopt a constructivist
approach to socio-political issues and monitor
their consumption activities relative to
existing cultural norms and customs. They
have a greater propensity to question existing
practices and tradition, and tend to be
proactive in evaluating their individual
situations. Refl exive investors may be more
inclined to refi ne their portfolios because
of a perceived lower risk of investing in
SR companies.
Sustainers believe that
individual and collective goals
can and
must
be jointly achieved. SIE is of paramount
importance to them, and benchmark measures
such as the Dow Jones Sustainability Index
and the Ethibel Sustainability Index help
Sustainers evaluate fi rm performance on the
basis of joint fi nancial and social responsibility
considerations. Social responsibility is regarded
as a matter of degree or grade rather than
a dichotomous distinction.
46
Bleeding Hearts: High importance
on social goals and low
importance on economic goals
This segment symbolizes the traditional
approach to social responsibility, which holds
that self-interest must be forsaken to benefi t
the common good. Such investors are likely
to support the notion of a social contract
between the individual and society – the
more one receives the more one owes to
society. The fi nding of a negative two-way
relationship between EIG and SIG (in high
SIG and low EIG groups) supports our
assertion. In addition, investors may feel that
it is not possible to distinguish normative
from instrumental motives when wealth and
social gains are jointly created. That is, it
is impossible to tell whether social progress
is a desirable ‘ byproduct ’ or being pursued
as an end to itself. This approach posits that
social responsibility requires the sacrifi ce
of self-interest for social progress, implying
that SR investors must be willing to pay
an ethical penalty.
47,48 Thus, we can expect
these investors to accept lower rates of return
on investments that advance social objectives.
Researchers suggest that psychic income
can compensate SR investors for fi nancial
losses.
7,49 It was surprising to fi nd that
Bleeding Hearts appear to harbor materialistic
values. In retrospect, this may not be as
anomalous; after all, this exemplifi es the
American dream
. Interestingly, religiosity plays
an important role in their social investing
decisions – it was found to affect SIG in
both high SIG and low EIG groups. In
addition, this group appears to be infl uenced
more strongly than any other by protected
values, and is less likely to compromise ideals
to achieve fi nancial gains. The importance
of SIE is underscored by the signifi cant
paths in both high SIG and low EIG groups.
Financial goals become subservient to social
goals, and social responsibility may be
regarded as a dichotomous ‘ is ’ or ‘ is not ’
property. This group likely perceives that
they can discharge their societal responsibilities
by boycotting ‘ bad ’ companies.
Therefore, this segment is more likely to
use screens to identify suitable investing
opportunities.
It was surprising to fi nd the absence
of infl uence of EA on SIG in both high
SIG groups (that is, Sustainers and Bleeding
Hearts). However, it is likely that SIE
completely mediates this relationship as
investors grow more concerned about the
larger picture. In addition, as the greening
of businesses has become a mainstream
phenomenon, environmental responsibility
is likely viewed as a qualifi er and not a
differentiator. The issue merits further
investigation.
© 2009 Palgrave Macmillan 1363-0539
Journal of Financial Services Marketing Vol. 14, 2, 118–134 129
Not everybody wants to save the world
Profi teers: High importance
on economic goals but low
importance on social goals
Investors who give high importance to
individual economic goals and low
importance to collective social goals can be
distinguished by their cupidity and lack of
concern for societal issues. Their overriding
self-interest may be motivated by extremely
individualistic and materialistic values.
This view is supported by the fi nding of
a signifi cant path from materialism to EIG
in the high EIG group. Their lack of
concern for social progress may stem from
a perceived lack of SIE (for example,
I can ’ t
change the world on my own
). This premise
needs further investigation, as the path from
SIE to SIG was not signifi cant in the low
SIG group, but was signifi cant in the high
EIG group. Also, they are likely to be less
concerned about protecting the natural
environment. At the same time, religiosity
has no infl uence on their investing goals
as suggested by non-signifi cant paths from
the antecedent to SIG in both low SIG
and high EIG groups. Much of the research
that debunks the impacts of investor boycotts
on the share prices of socially irresponsible
companies
50 is implicitly based on the
exploitative instincts of investors profi led
in this segment. The standard textbook
argument in support of this view is that even
if share prices drop as a result of a boycott,
there are a suffi cient number of buyers to
capitalize on the profi table trading
opportunity. Further research on this matter
is necessary as the path from economic to
SIG was signifi cant in the high EIG group,
but not signifi cant in the low SIG group.
Unconcerneds: Low importance
on economic and social goals
Investors who place little importance on
their economic goals and social progress
may appear apathetic and inert on the
surface. However, this may be an inaccurate
characterization for a number of reasons.
First, consider that many investing choices
are severely constrained. Most Americans
participate in the stock market through
employer-defi ned retirement plans. They
have little control over the direction or
timing of investments into their retirement
accounts. Employer-defi ned benefi t plans
(44 per cent of all retirement funds) do not
permit any individual input into investing
decisions.
51 Investor choice is also limited
in case of employer-defi ned contribution
plans (22 per cent of all retirement funds)
to a select set of fi nancial services providers.
Second, current consumption patterns and
economic statistics indicate that the average
US household has little money left over
to invest, over and above their retirement
contributions. According to a 2003
Congressional Budget Offi ce Study, the
personal savings rate has been declining
steadily for the past two decades, and current
Bureau of Economic Analysis (BEA)
estimates indicate a negative savings rate.
At the same time, consumer spending has
grown by over 150 per cent from 1990 to
2003 in infl ation-adjusted dollars. Third,
investing requires advanced knowledge and
expertize. Even those that enjoy the benefi t
of self-directed retirement plans may lack the
skill or time to closely track the progress of
their investments. Finally, research indicates
that investors who participate through
employer-defi ned plans tend to desist from
actively managing their investments either
because of inertia or because they perceive
that the default options constitute investing
advice.
52 Therefore, it should come as no
surprise that a large number of Americans
fall into this category of investors. We posit
that these constraints on behavior infl uence
investing goals through response effi cacy
53
and investor inertia.
54 First, this segment
likely perceives a low response effi cacy –
that is, a low probability that investing
goals will solve their social or economic
problems. Hence, investing goals are given
less importance and consideration. Further,
investor inertia arising from the need to do
‘ nothing ’ to preserve the status quo lowers
130
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 2, 118–134
Kashyap and Iyer
the likelihood that Unconcerneds will devote
time and attention to their investing goals.
The fi ndings regarding the infl uence of
EA (signifi cant path in low SIG group) and
materialism (signifi cant path in low EIG
group) on SIG were mixed and deserve
further consideration. In addition, a signifi
cant path from religiosity to SIG in the
low EIG group (but not in the low SIG
group) suggests that more work needs to be
done to understand this group ’ s motivations.
Protected values do not appear to play a role
in the formation of SIG as evidenced by the
non-signifi cant paths from this antecedent to
SIG in both low SIG and low EIG groups.
Further, SIE is unlikely to infl uence this
group ’ s SIG. Unconcerneds may believe that
it is necessary to sacrifi ce some economic
gains to achieve social benefi ts (signifi cant
negative path from SIG to EIG). However,
unlike Sustainers, they are unlikely to
endorse the convergence of economic and
social wealth.
Mutual funds and investor portfolios must
be customized for different segments to
refl ect the relative importance of economic
and social goals in light of their interdependence.
For instance, Bleeding Hearts
might be willing to accept lower rates of
return, whereas Sustainers would not. Our
contention is that investors perceive the
domains of social and economic gains and
losses very differently. Although some SR
investors (that is, Bleeding Hearts) may
be willing to compensate for economic
losses through psychic gains, they may be
unwilling to forego social losses (especially
those protected values) for economic gains.
Therefore, it is imperative that fund
managers determine the size of the Bleeding
Heart segment and their willingness to
accept additional risk and / or lower rates
of return to fulfi ll their social goals. Further,
while targeting SR investors can expand
market potential, any additional exclusionary
criteria, such as negative screens, may
increase market risk and opportunity costs.
Fund managers would be well advised
to adopt strategies to lower tracking errors
relative to conventional benchmarks such
as the Russell or the DJ indices.
Relationships are particularly important
in the fi nancial services sector.
55 A focus on
antecedent infl uences provides opportunities
to deploy differentiated strategies and allocate
resources based on investor needs. For
instance, fi nancial performance is equally
important to both Profi teers and Sustainers
in light of their focus on economic goals.
However, our fi ndings suggest that Sustainers ’
expectations of fi duciary duties may extend
beyond communicating fi nancial returns to
assuring impacts of investments on environmental
and social performance.
We found that religiosity was a signifi cant
infl uence on SIG for Bleeding Hearts.
This is not surprising given the historical
roots of SR investing in the United States.
Fund managers recognize these differences
and employ exclusionary screens to weed
out companies marketing ‘ sin ’ products
such as tobacco, alcohol, pornography and
gambling. Our fi ndings underscore the
importance of religious values for Bleeding
Hearts. This has signifi cant implications for
media strategy and product design. For
instance, television shows like Touched by
an Angel and the 700 Club might appear
well suited for these segments. However,
religious beliefs may vary widely from the
most liberal investor who wishes to
champion gay rights or abortion to the
most conservative investor who wishes to
promote the exact opposite. Therefore, a
better and deeper understanding of the
beliefs underlying various faiths is essential
for product customization. Consequently,
we expect a greater proliferation of hybrid
funds in the future (for example, KLD
Catholic Values Index), which simultaneously
conform to ethical standards and espouse
specifi c subsets of religious values.
Bleeding Hearts and Sustainers strongly
believe that their investments produce social
advantages. Interestingly, this fi nding is
mirrored in the domains of philanthropy
© 2009 Palgrave Macmillan 1363-0539
Journal of Financial Services Marketing Vol. 14, 2, 118–134 131
Not everybody wants to save the world
and environmentalism in which donors and
environmentally responsible consumers are
more likely to believe that their actions
benefi t the common good. Over the past
20 years, researchers have consistently found
evidence to support the importance of
effi cacy for donorship and environmentally
responsible behaviors.
56,57 This fi nding has
signifi cant implications for fund managers –
they must reinforce the notion of effi cacy
by communicating back to the investor the
impact of shareholder advocacy efforts and
the investments on the focal social issue.
Too often, reporting is treated simply as
a fi duciary obligation and important messages
are swamped under the weight of fi nancial
data. We recommend that separate communications
that specifi cally address these issues
be devised and delivered periodically to
Bleeding Hearts and Sustainers. Such
reinforcement is vital not only to ensure
their continued patronage, but also to
attract potential investors.
Protected values had a strong association
with SIG for Bleeding Hearts, suggesting
that exclusionary criteria (that is, negative
screens) would be especially important to
this group. Note that most screens are based
to a large extent on subjective managerial
assessments because of the strong linkages
(stock holdings, common board members
and so on) among modern corporations.
Therefore, an understanding of investors ’
protected values will serve not only to
prioritize social issues, but also to enhance
the quality of screening decisions. In
addition, we focused only on the infl uence
of inviolable acts on investor goals. An
interesting research question is how varying
levels of progressive practices might affect
investor goals and behavior.
We acknowledge that since our approach
utilizes cross sectional and not panel data,
our models capture associations and not
causal infl uences. In summary, we suggest
that a focus on the relative importance
of economic and social goals can provide
a better understanding of psychological
antecedents that motivate investing
behavior.
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APPENDIX
Environmental attitude
EA1 I feel a moral obligation to help
protect the environment in whatever
way I can.
EA2 I believe harm to our environment
is a serious problem.
EA3 I take responsibility to protect the
environment around me.
EA4 I feel connected with nature and the
world around me.
D
EA5 I think of myself as an
environmentalist.
D
Social investing effi cacy
SIE1 I believe my investments have a
positive impact on the environment.
SIE2 I think my investments have a
favorable effect on community welfare.
SIE3 I want my investments to enhance
society ’ s welfare.
SIE4 I think my investments will improve
the condition of the ecosystem.
SIE5 My investments will have a positive
bearing on corporate governance.
D
Religiosity
R1 Spiritual values guide me in making
important decisions.
R2 If more Americans used their religion,
they would make better choices.
R3 My religious beliefs help me recognize
the dignity and welfare of people.
R4 I am guided by my religion to ensure
that my actions do not intentionally
harm others.
R5 I would describe myself as very
religious.
Materialism
M11 I measure my achievements through
my material possessions.
M12 My possessions speak a lot about
my status.
M13 I like to impress people with my
material possessions.
M21 I like to keep my life materially
simple.
R
M22 Owning things is not very important
to me.
R
M31 I ’ ll feel happier if I own more
things.
M32 I don ’ t have all the things needed
to enjoy life.
Economic investing goals
1. My fi nancial strategy is focused solely
on earning the best possible return.
2. Increasing my fi nancial wealth through
investing is my primary goal.
3. My investments must exceed a minimum
expected rate of return.
4. It is important that the returns
provided by my investments make
me happy.
Social investing goals
1. The main goal of my investment strategy
is advancing social agendas.
2. I aim to promote environmental causes
through my investment decisions.
3. I never invest in what I deem as fi rms
‘ bad ’ for society.
Protected values
No matter how large the benefi ts, my
personal values
would not allow me to ever
invest
in a company that
1. manufactures fi rearms;
2. manufactures alcoholic beverages;
134
© 2009 Palgrave Macmillan 1363-0539 Journal of Financial Services Marketing Vol. 14, 2, 118–134
Kashyap and Iyer
3. manufactures or markets tobacco
products;
4. operates casinos and gambling businesses;
5. develops products that harm the
environment;
6. owns or operates nuclear power plants;
7. derives revenues from the sale of
pornography; and
8. was involved in tax fraud.
R
Denotes Reversed Item; D DenotesDropped Item
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