Corporate Intent

Investors and executives have often floated the idea that companies can “do well by doing good.” For example, by leaning into sustainability or promoting fair treatment of workers, companies can enjoy higher profits thanks to talent recruitment, loyal customers, or easier financing. However, in a new experimental paper, we show that this story, sometimes referred to as “instrumental stakeholderism”,  is incomplete: stakeholders care not just about what firms do, but why they do it.​

The core finding: an “intention premium”

The paper’s central question is simple: if two firms take the same environmentally beneficial action and generate the same cash flows, does it matter to investors whether the CEO says the firm is motivated by profit or by social concern? A strict consequentialist would answer “no”: only the financial payouts and externalities should matter.​

However, in a large online experiment with 1,399 U.S. participants recruited via Prolific, we find the opposite. When a firm reduces pollution, investors are willing to pay more for its shares if the CEO frames the decision as driven by concern for the environment, rather than by profit maximization. Holding the dividend and the environmental impact fixed, a purely prosocial intention generates a positive “intention premium,” while an explicitly profit-only intention generates a discount.​ On average, we find that people are willing to pay a premium of roughly 7 cents per share when management expresses prosocial intent, representing roughly 3% of the cash value of the stock.

Inside the experiment: praise, blame, and ambiguity

Participants first complete a short quiz to ensure they understand basic stock valuation: a share that pays a certain, immediate dividend of $X should be worth $X to a purely profit-maximizing investor. This primes respondents toward financial thinking.

They are then placed in the role of shareholders and asked—over 18 rounds—to state their maximum willingness to pay for a stock that pays a one-time dividend and has a specified effect on pollution relative to industry standards. Each vignette varies along three dimensions: the dividend per share, the environmental externality (more or less pollution than the industry standard), and a short CEO statement about the firm’s intentions.​ For example, in the profit intent treatment, the CEO states: “We use this production technique because we think it will generate the most profits. Our priority as a company is maximizing profits.”

We structure our treatments into three groups of conditions:​

• Praise conditions: in this treatment the hypothetical firm reduces pollution damages borne by society relative to the industry standard. Within this condition, we have four intention statements: the CEO either says nothing about intentions, explicitly prioritize company profits, explicitly prioritizes the environment, or claims to pursue both goals without ranking them.​
• Blame conditions: in this condition, the hypothetical firm increases pollution damages borne by society relative to the industry standard. Within this condition, we have four intention statements: the CEO may be silent, prioritize company profits, explicitly mention his personal compensation-related incentives, or express regret and signal personal prosocial preferences (e.g., transparently donating to environmental causes).​
• Ambiguity conditions: in this condition, the same firm runs two divisions, one polluting more and one polluting less than the industry standard. Combining the effects of the two divisions will lead to either a net reduction or net increase in pollution.​ The CEO expresses no explicit intention, but the blend of divisions is designed to convey ambiguity about the company intentions.

After each treatment, we run the crucial check that participants do update their beliefs in response to the intent statements. For example, when the CEO claims prosocial intent in the praise setting, 68 percent of respondents say the firm’s primary goal is to reduce pollution, compared with only 30 percent when no intent is stated and 12 percent when the CEO explicitly prioritizes profits. The stated intent strongly shifts perceived motives among the participants.​

Why do intentions matter?

The result that intentions are priced may be surprising, because in our experiment intentions do not change cash flows or externalities. We find evidence that of several mechanisms at play.

One channel is participants update their beliefs about the CEO’s moral character. After each vignette, participants rate how likely the CEO is to (i) donate to environmental causes, (ii) ensure product safety, and (iii) refrain from fraud. Treatments with profit-only intention statements significantly lower all three assessments, while prosocial intent statements sharply raise them. For example, in praise conditions, the baseline probability that the CEO donates to environmental causes is 40 percent, but it falls by 13 percentage points when the firm confesses a pure profit motive and rises by 32 points when it declares a prosocial motive. Ambiguous corporate actions—simultaneously running “dirty” and “clean” divisions—also erode perceived character.​

Importantly, these character assessments cannot rationally affect payoffs in our experimental design: the stock delivers a one-time certain dividend, so beliefs about future fraud or safety have no financial relevance. The valuation effect must therefore reflect a direct distaste (or taste) for owning shares of firms run by managers with certain types of motives and character.​

The strength of the intention premium also depends systematically on respondents’ moral and political profiles:​

• Participants who display deontological leanings show stronger sensitivity to intent.​
• Politically liberal participants price intentions substantially more than politically conservative ones.
• Women are more responsive than men to prosocial framing and more punitive toward profit-only motives, consistent with prior evidence that women tend to adopt more deontological moral stances on average.​
• More collectivist respondents, who think the economic system should be designed to maximize collective interest rather than individual interests, place higher value on both pollution reduction and prosocial motives than more individualistic respondents.​

These patterns point to significant heterogeneity: the same corporate statement can lead to pricing premiums or discounts depending on the beliefs and preferences of the investor.

Dual objectives and ambiguity

One of the most intriguing results concerns firms that claim dual objectives. When CEOs state that they aim both to maximize profits and to preserve the environment, without explicitly ranking these objectives, investors reward this intent with a premium comparable to that given to CEOs expressing a purely prosocial motive—and substantially larger than the premium for a purely profit-driven motive. Explicitly acknowledging profit as a goal underlying pollution-reduction activities does not seem to backfire, as long as it is coupled with an environmental objective as well.​

In contrast, ambiguous actions are treated differently. In the “praise” condition when a firm reduces pollution on net but still operates a dirtier-than-average division, the “goodness premium” essentially disappears. In blame conditions, evidence of some good behavior partially softens but does not eliminate the “brown discount.”​

Taken together, these results suggest a simple, practical message: stakeholders can live with multiple goals, and may even reward them, but they punish perceived half-heartedness in execution.

Implications for CSR, ESG, and corporate communication

The paper has direct implications for how firms design and communicate their ESG and CSR strategies.​

First, it undermines the comforting “no-trade-off” rhetoric that when doing good also boosts profits, shareholder and stakeholder value maximization become equivalent. The experiment shows that when firms openly frame prosocial actions as instruments for profit, investors and consumers become less willing to make the sacrifices that underpin the “win–win” equilibrium—accepting lower returns, paying higher prices, or working for less to support a responsible firm.​

Second, it helps explain why many companies downplay the business case for their sustainability initiatives and instead emphasize a prosocial intent, even when internal models are all about long-run NPV. Making the profit motive too salient risks eroding the very willingness to pay (for products, jobs, or securities) that makes the initiative profitable in the first place. The study highlights that dual-motive statements prioritizing both profitability and prosocial intentions command an intention premium, helping to rationalize the observed increase in dual-objective statements in shareholder letters (Rajan, Ramella, and Zingales, 2023).