Are Shareholders Willing to Pay for Financial, Social and Environmental Disclosure? A Choice-based Experiment

Abstract

This study investigates whether shareholders are willing to pay for higher levels of corporate financial, social, and environmental disclosure. We conduct a choice-based conjoint experiment wherein 65 shareholders are asked to make 12 choices, choosing each time between two predetermined randomized combinations of different levels of investment returns, financial disclosure, environmental disclosure, and social disclosure. Results indicate that whereas shareholders are willing to pay for financial disclosure and environmental disclosure, they are unwilling to pay for social disclosure. Hence, the latter finding does not provide conclusive evidence on the overall question. However, the result that investors are willing to pay for non-financial disclosures – such as environmental information – constitutes our main contribution as prior research has not been able to provide strong evidence that investors are willing to forfeit investment returns in order to gain access to more corporate disclosures. The use of a choice-based conjoint experiment to examine these matters is novel and potentially opens avenues for future research. We believe our theoretical and practical contributions to be of interest to various stakeholders, including firms in making decisions about disclosure levels and regulators in assessing the need for disclosure regulation.