Contracts with (Social) benefits: The implementation of impact investing

Publication Title

Journal of Financial Economics

Authors

Christopher Geczy, University of Pennsylvania
Jessica Jeffers, University of Chicago Booth School of BusinessFollow
David K. Musto, University of Pennsylvania Wharton SchoolFollow
Anne Tucker, Georgia State University College of LawFollow

Document Type

Article

Publication Date

2021

Abstract

We draw on new data and theory to examine how private market contracts adapt to serve multiple goals, particularly the social-benefit goals that impact funds add to their financial goals. Counter to the intuition from multitasking models (Holmstrom and Milgrom, 1991), few impact funds tie compensation directly to impact, and most retain traditional financial incentives. However, funds contract directly on impact in other ways and adjust aspects of the contracts such as governance. In the cross-section of impact funds, those with higher profit goals contract more tightly around both goals.

Comments

External Links

SSRN

Recommended Citation

Christopher Geczy, et al., 142 J. Fin. Econ. 697 (2021).