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Journal of Financial Economics Vol. 142 No. 2 2021

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

Christopher Geczy; Jessica S. Jeffers1; David K. Musto2; Anne M. Tucker3

1 University of Chicago · 2 University of Pennsylvania · 3 Georgia State University

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.

DOI
10.1016/j.jfineco.2021.01.006
Volume
142
Issue
2
Pages
697-718
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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