As part of the series of the „Finance Research Seminar“, VGSF welcomes Thomas Dangl from TU Wien to present his research paper.
Personal Webpage
Paper
Stochastic Social Preferences and Corporate Investment Decisions
(joint with Michael Halling, Jin Yu and Josef Zechner)
This paper develops a dynamic general equilibrium model with stochastic social preferences and endogenous corporate investment decisions. We find that firms’ responses to changing investor tastes mitigate or reverse the effect that preference shocks have on valuation when investment decisions are fixed. Stochastic social preferences delay the move to a greener economy, especially when preference shocks correlate positively with aggregate cash flows. Risk aversion initially helps the transition, but later slows it down. Correlations between stock returns of firms in brown and green sectors increase (decrease) following an increase (decrease) in green investors’ social preferences. Small changes in social preferences can have large supply effects even when effects on the cost of capital wedge between green and brown firms are negligible.
Back to overview
