Media Releases

Money talks when it comes to acceptability of “sin” companies, study reveals

July 30, 2014

TORONTO, ON – Com­pa­nies who make their mon­ey in the “sin” indus­tries such as the tobac­co, alco­hol and gam­ing indus­tries typ­i­cal­ly receive less atten­tion from insti­tu­tion­al investors and finan­cial ana­lysts.

But new research shows social norms and atti­tudes towards these types of busi­ness­es are sub­ject to com­pro­mise when their share price looks to be on the rise. A paper from the Uni­ver­si­ty of Toron­to’s Rot­man School of Man­age­ment found that insti­tu­tion­al share­hold­ings and ana­lysts’ cov­er­age of sin firms were low when firm per­for­mance was low but went up with ris­ing per­for­mance expec­ta­tions.

That sug­gests that mar­ket par­tic­i­pants may ignore social norms and stan­dards with the right finan­cial reward.

“This is a way to test the trade-off between peo­ple’s non-finan­cial and finan­cial incen­tives. The bound­ary of peo­ple’s social norms is not a con­stant,” said researcher Hai Lu, an asso­ciate pro­fes­sor of account­ing at the Rot­man School.  Prof. Lu co-wrote the paper with two for­mer Rot­man PhD stu­dents, McMas­ter Uni­ver­si­ty’s Kevin Veen­stra and Yan­ju Liu, now with Sin­ga­pore Man­age­ment Uni­ver­si­ty.

The paper sheds light on why there can be a dis­con­nect between the invest­ment behav­iour of Wall St. and the eth­i­cal expec­ta­tions of ordi­nary peo­ple. It also sug­gests a wor­ri­some impli­ca­tion that com­pro­mis­ing one’s eth­i­cal val­ues in the face of high finan­cial rewards can become a social norm in itself.

On the brighter side, the paper also finds that strong social norms still have an influ­ence over peo­ple’s behav­iour. If social norms are strong enough and the price of ignor­ing them is high, this may act as a dis­in­cen­tive to dis­re­gard them in favour of oth­er ben­e­fits.

This is the first study to exam­ine whether the social accept­abil­i­ty of sin stocks can vary with finan­cial per­for­mance.  The researchers com­pared con­sump­tion and atti­tu­di­nal data with infor­ma­tion on sin firm stocks, ana­lysts’ cov­er­age and lev­els of insti­tu­tion­al invest­ment.

The study received finan­cial sup­port from the Michael Lee-Chin Fam­i­ly Insti­tute for Cor­po­rate Cit­i­zen­ship at the Rot­man School and will be pub­lished in Account­ing, Orga­ni­za­tions and Soci­ety. It is cur­rent­ly online at

For the lat­est think­ing on busi­ness, man­age­ment and eco­nom­ics from the Rot­man School of Man­age­ment, vis­it

The Rot­man School of Man­age­ment at the Uni­ver­si­ty of Toron­to is redesign­ing busi­ness edu­ca­tion for the 21st cen­tu­ry with a cur­ricu­lum based on Inte­gra­tive Think­ing. Locat­ed in the world’s most diverse city, the Rot­man School fos­ters a new way to think that enables the design of cre­ative busi­ness solu­tions.  For more infor­ma­tion, vis­it


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Ken McGuf­fin
Man­ag­er, Media Rela­tions
Rot­man School of Man­age­ment
Uni­ver­si­ty of Toron­to
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