Does transaction atmosphere influence the decision-making behaviour of investors?

Abstract

The profitability of impact investments ranges from a return on investment to market returns. To accomplish social goals, certain investors forgo part of the financial return. This approach opposes the concepts of conventional finance theory, which see the individual as a rational profit-maximizing decision-maker. A quantitative experimental study was conducted with students from the Upper Austria University of Applied Sciences, Steyr Campus, whereby the subjects were divided into two groups. A social Transaction Atmosphere (TA) was created in one group through the targeted use of stimuli. Subsequently, both groups had to make an investment decision in an identical scenario. The aim of the study and point of intersection between transaction cost theory and the social finance (SF)/impact investing (II) area is to analyse the observable "irrationality" in SF/II with reference to the transaction atmosphere as the primary decision-making element. The underlying scientific question investigates the impact of a socially shaped TA on the decision-making of investors. Experiment results demonstrated that the use of stimuli significantly raised the proportion of impact investments to overall investments. This finding suggests that a socially moulded TA is essential for investors' decision-making, whereby receptivity to the stimuli depends on individual investor characteristics, such as moral standard, financial knowledge, and previous experience with investment decisions. The financial aspect continues to play an important role in the decision- making process of investors.