Research / BFI Working PaperJan 09, 2024

How Do Consumers Use Firm Disclosure? Evidence from a Randomized Field Experiment

Sinja Leonelli, Maximilian Muhn, Thomas Rauter, Gurpal Sran

We combine a large-scale field experiment with a customized survey to study whether and how consumers use firm disclosure. In a sample of more than 24,000 U.S. households, we first establish several stylized facts: (i) the average consumer has a moderate preference to purchase from ESG-responsible firms; (ii) consumers typically have no preference for more or less profitable firms; (iii) consumers rarely consult ESG reports and virtually never use financial reports to inform their purchase decisions. In our field experiment, we then inform households about real firm-disclosed profitability and ESG activities through seven randomized information treatments. Consumers increase their purchase intent when exogenously presented with firm-disclosed positive signals about environmental, social, and—to a lesser extent—governance activities. Full ESG reports only have an impact on consumers who choose to view them, whereas financial reports and earnings information do not have an effect. After the experiment, consumers increase their actual product purchases, but these effects are small, short-lived, and only materialize for viewed ESG reports and positive social signals. Through a follow-up survey, we provide explanations for why consumers (do not) change their shopping behavior after our information experiment.