title: Immorally obtained principal increases investors' risk preference.
abstract: Capital derived from immoral sources is increasingly circulated in today's financial markets. The moral associations of capital are important, although their impact on investment remains unknown. This research aims to explore the influence of principal source morality on investors' risk preferences. Three studies were conducted in this regard. Study 1 finds that investors are more risk-seeking when their principal is earned immorally (through lying), whereas their risk preferences do not change when they invest money earned from neutral sources after engaging in immoral behavior. Study 2 reveals that guilt fully mediates the relationship between principal source morality and investors' risk preferences. Studies 3a and 3b introduce a new immoral principal source and a new manipulation method to improve external validity. Guilt is shown to the decrease the subjective value of morally flawed principal, leading to higher risk preference. The findings show the influence of morality-related features of principal on people's investment behavior and further support mental account theory. The results also predict the potential threats of "grey principal" to market stability.
authors.affiliation: Department of Social Work and Social Administration, the University of Hong Kong, Pokfulam, Hong Kong SAR, P.R. China.
authors.forename: Chuqian
authors.identifier: http://orcid.org/0000-0001-8428-2209
authors.initials: C
authors.lastname: Chen
authors.affiliation: Department of Psychology and Behavioral Sciences, Zhejiang University, Hangzhou, P.R. China.
authors.forename: Jiaxin
authors.initials: J
authors.lastname: Chen
authors.affiliation: Department of Psychology and Behavioral Sciences, Zhejiang University, Hangzhou, P.R. China.
authors.forename: Guibing
authors.initials: G
authors.lastname: He
mesh_terms: D000066479:Criminal Behavior; D005260:Female; D006167:Guilt; D006801:Humans; D007182:Income; D007449:Investments / Q000941:ethics*; D008297:Male; D012306:Risk; D014342:Truth Disclosure