Pricing asset beyond financial fundamentals: The impact of prosocial preference and image concerns

This paper examines the effects of two non-financial values—prosocial preferences and image
concerns—on the pricing of socially beneficial stocks within experimental asset markets, isolating
their effect from those of stocks’ financial fundamentals. To this end, we designed a novel
laboratory asset market where stocks shared the same fundamental value but varied in their
associations with non-financial values. We found that prosocial preferences alone have a minimal
impact on the market prices of socially beneficial stocks. However, the presence of image
concerns significantly raises the market price of socially beneficial stocks. Additionally, under this
condition, individuals trade these stocks at high prices regardless of their level of non-financial
values. To benchmark the effect of non-financial values on stock valuation at the individual level,
we conducted a parallel non-market experiment incorporating the same decision factors. In this
non-market setting, prosocial preferences alone positively impacted stock reservation prices, and
the addition of image concerns further increased these prices.