Is Sin Always a Sin? The Interaction Effect of Social Norms and Financial Incentives on Market Participants’ Behavior

Using alcohol, tobacco, and gaming consumption data and people’s attitudes toward these sin products to proxy for the social norm acceptance level, we examine how social norms affect the decisions of investment professionals and managers of these “sin” companies. We find that institutional investors’ shareholdings and analyst coverage of “sin” companies are increasing in the degree of social norm acceptance and that the association between …