Efficacy of Opt-in vs. Opt-out Default Nudges to Encourage Socially Responsible Investing: The Moderating Role of Financial Literacy
Keywords:Behavioral finance, default nudges, financial literacy, socially responsible investment
This study intends to investigate the impact of opt-in and opt-out default nudges on Pakistani investors' decisions to make socially responsible investments, with the moderating influence of investors' financial literacy. A commercial online panel is used to gather data as part of an experiment with an incentive-based online survey. A total of N = 518 individuals are randomly assigned to two treatment groups—opt-in and opt-out—and one control group. The empirical findings of this study show that, although being less effective than the opt-out nudge effect, the opt-in nudge effect nevertheless has a considerable impact on SRI decisions. The study's results also show that financial literacy moderator has partially significant impact on the efficacy of default nudges. In order to improve investment instruments that might encourage SRI investment in society, SRI policymakers can benefit from this study.
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