NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Impact Investing

Brad M. Barber, Adair Morse, Ayako Yasuda

NBER Working Paper No. 26582
Issued in December 2019
NBER Program(s):Asset Pricing, Corporate Finance

We document that investors derive nonpecuniary utility from investing in dual-objective VC funds, thus sacrificing returns. Impact funds earn 4.7 percentage points (ppts) lower IRRs ex post than traditional VC funds. In random utility/willingness-to-pay (WTP) models investors accept 2.5-3.7 ppts lower IRRs ex ante for impact funds. The positive WTP result is robust to fund access rationing and investor heterogeneity in fund expected returns. Development organizations, foundations, financial institutions, public pensions, Europeans, and UNPRI signatories have high WTP. Investors with mission objectives and/or facing political pressure exhibit high WTP; those subject to legal restrictions (e.g., ERISA) exhibit low WTP.

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Document Object Identifier (DOI): 10.3386/w26582

Published: Brad M. Barber & Adair Morse & Ayako Yasuda, 2020. "Impact Investing," Journal of Financial Economics, .

 
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