Corporate Intent

Do investors care about why a firm behaves responsibly, over and above what the firm does and how much cash it earns? In our main experiment, participants value shares in companies that reduce pollution relative to peers, while CEOs articulate the company’s intentions: prosocial or for-profit. Investors are willing to pay more for shares in a company that takes a given prosocial action if it is motivated by social concern rather than profit maximization. This "intention premium" is distinct from the valuation effects of cash flows and environmental externalities. Respondents who are deontological, politically liberal, female, or less individualistic value the company’s intent the most. Additionally, and somewhat surprisingly, respondents view favorably firms that embrace both profit and social objectives, without ranking them. Overall, our findings temper claims that when there is no financial trade-off between doing good and doing well, shareholder value and stakeholder value maximization are equivalent.