UN PRI signatories' ethics: Serious ethical first movers vs. late free riders

The UN Principles for Responsible Investment (UN PRI) is a prominent global initiative by institutional investors to support the development of an ethical financial system. In our paper, we investigate to what extent UN PRI signatories base their business activities on ethics. Institutional theory suggests an increasing pressure on firms to ensure legitimacy by signing ethical initiatives. While a signature of such initiatives signals the awareness of the signatory towards ethical issues, the compliance with the initiative's principles is often voluntary. Thus, the seriousness of the implementation of ethical issues is the subject of debate. With an event study design, we show evidence that UN PRI signatories perform better in the ethical dimension than matched non-signatories after the signature date. Early signatories base their business activities to a greater extent on ethics than later signatories. Our findings are important to be able to better understand the potential of non-compulsory ethical initiatives in increasing the awareness of ethical business activities and in supporting an ethical change by institutions based on self-reliance.