Discover our list of content: future events & news

CEE-M's events

  • Home
  • Signaling Trustworthiness with Impact Investments: An Experimental Study
BE Seminar

Economics and Finance, Experimental and Behavioural Seminar

Signaling Trustworthiness with Impact Investments: An Experimental Study


Béatrice Boulu-Reshef
Associate Professor of Economics at the Centre d'Economie de la Sorbonne, Université Paris 1 Panthéon-Sorbonne


Entrepreneurs may differentiate their ventures and attract investments by advertising that their firm produces positive externalities for society. Such signaling of entrepreneurs’ trustworthiness may be a prevalent practice in these investment opportunities which are casually referred to as “impact investment’’ by practitioners. This paper investigates this possible signaling by studying the interplay of altruistic, fiscal, and reputational motives that characterizes these investments in a laboratory experiment. In the experiment, the investor may transfer money to the entrepreneur, who may then invest some, all or none of this money onto a conventional investment opportunity or an impact investment opportunity involving a spillover, and then decide whether or not to transfer some of the funds back. Entrepreneurs choose a type of investment and their choice is visible to the investors. The results are that the choice alone of an impact project does not increase investors’ transfers to impact investments but a higher spillover does as long as the tax from possible gains is not too high. Pro-social entrepreneurs do not announce higher rates of spillovers. In the presence of tax, entrepreneurs internalize that a too high spillover could scare away investors. The experiment shows that the presence of impact investments helps investors coordinate onto different investment types. It identifies the mechanisms behind investors believing that socially-oriented entrepreneurs will be more trustworthy. Specifically, as investors’ transfers react to the effective societal impact and not to the mere project type, making that quantitative information visible allows investors to differentiate between investment opportunities.

Practical information


Université Montpellier - Faculté d'économie - salle 416
Avenue Raymond Dugrand 34960 Montpellier

Dates & time

Nov 15, 2018


Marc Willinger
View mail