Does military leadership regulate sin investments? Evidence from property/casualty insurance industry

Abstract

With a novel dataset of property/casualty (P/C) insurance companies’ sin investments- holdings of bonds and stocks issued by companies involved in producing alcohol, tobacco, and gaming, we find that the presence of military leadership strengthens insurance companies’ adherence to social norms and discourages portfolio allocation to sin investments, especially sin bonds. The reduction effect is more pronounced during the recent financial crisis when insurance companies are enticed to sacrifice social norms for financial gains. Our findings offer valuable insights into socially responsible investing by institutional investors.