Abstract:
Impact investors are faced with the issue of risk and return evaluation on both
the scale of financial performance and social performance. The study extends
the understanding of the relationships between investor perception of risk,
sense of understanding, and financial decision-making into the inherently
dichotomous context of impact investment. Through the lens of prospect theory, an instrument for data collection was designed to evaluate the effects of
finance outcome dominant, social outcome dominant, and hybrid outcome
framing on an investor‘s perception of risk, sense of understanding, and capital
allocation decisions. This research found that variability in outcome framing
influences an investor‘s capital allocation decision but does not affect the
perception of risk or sense of understanding. These findings contribute to the
understanding of how the framing of compound outcomes with both financial
and moral implications affects the decision-making choice process of
individuals.
