Resumen de Is sin always a sin? The interaction effect of social norms and financial incentives on market participants� behavior

Yanjun Liu, Lu Hai, Kevin Veenstra

• Using alcohol, tobacco, and gaming consumption data and people�s attitudes toward these sin products to proxy for social norm acceptance levels, we show a strong interaction effect between social norms and financial incentives, which significantly influence the behavior of market participants. Specifically, institutional investors� shareholdings and analyst coverage of sin companies increase with the degree of social norm acceptance. The association between shareholdings/coverage and social norm acceptance is less pronounced for firms with higher future expected performance. Our results show that social norms and financial incentives have a powerful interaction effect in determining the behavior of market participants, suggesting that social norms can be crossed when motive and opportunity exist.