Ethical Screening and Financial Performance: The Case of Islamic Equity Funds

Journal of Business Ethics

Volumn 137, Issue 1, 2016, Pages 83-99

  Nainggolan, Yunieta ^a,b   How, Janice ^a   Verhoeven, Peter ^a  

^a QUEENSLAND UNIVERSITY OF TECHNOLOGY   (Australia)

^b NONE   (Australia)

Author keywords

Ethical investments; Ethical screening; Fund performance; Islamic equity funds

Indexed keywords

EID: 84921342230     PISSN: 01674544     EISSN: 15730697     Source Type: Journal    
DOI: 10.1007/s10551-014-2529-5     Document Type: Article

References (41)

1. Abdelsalam, O., Fethi, M. D., Matallín, J. C., & Tortosa-Ausina, E. (2014). On the comparative performance of socially responsible and Islamic mutual funds. Journal of Economic Behavior & Organization, 103(Supplement), 108–128.
2. Abdullah, F., Hassan, T., & Mohamad, S. (2007). Investigation of performance of Malaysian Islamic unit trust funds. Managerial Finance, 33(2), 142–153.
3. Ahmed, A. (2010). Global financial crisis: an Islamic finance perspective. International Journal of Islamic and Middle Eastern Finance and Management, 3(4), 306–320.
4. Ayub, M. (2007). Understanding Islamic Finance. Hoboken, NJ: Wiley.
5. Barnett, M., & Salomon, M. (2006). Beyond dichotomy: The curvilinear relationship between social responsibility and financial performance. Strategic Management Journal, 27(11), 1101–1122.
6. Bauer, R., Koedijk, K., & Otten, R. (2005). International evidence on ethical mutual fund performance and investment style. Journal of Banking & Finance, 29(7), 1751–1767.
7. Capelle-Blancard, G., & Monjon, S. (2014). The performance of socially responsible funds: Does the screening process matter? European Financial Management, 20(3), 494–520.
8. Carhart, M. M. (1997). On persistence in mutual fund performance. Journal of Finance, 52(1), 57–82.
9. Chou, P., & Lin, M. (2002). Test of international asset pricing model with and without a riskless asset. Applied Financial Economics, 12(12), 873–883.
10. Climent, F., & Soriano, P. (2011). Green and good? The investment performance of US environmental mutual funds. Journal of Business Ethics, 103(2), 275–287.
11. Cumby, R. E., & Glen, J. D. (1990). Evaluating the performance of international mutual funds. Journal of Finance, 45(2), 497–521.
12. Derigs, U., & Marzban, S. (2008). Review and analysis of current Shariah-compliant equity screening practices. International Journal of Islamic and Middle Eastern Finance and Management, 1(4), 285–303.
13. Derigs, U., & Marzban, S. (2009). New strategies and a new paradigm for Shariah-compliant portfolio optimization. Journal of Banking & Finance, 33(6), 1166–1176.
14. Derwall, J., Koedijk, K., & Ter Horst, J. (2011). A tale of values-driven and profit-seeking social investors. Journal of Banking & Finance, 35(8), 2137–2147.
15. Economic Cycle Research Institute. (2010). Business cycle peak and through dates. Retrieved December 14, 2014, from http://ecri-prod.s3.amazonaws.com/reports/samples/1/BC_1009.pdf.
16. Faff, R. W. (2003). Creating Fama and French factors with style. Financial Review, 38(2), 311–322.
17. Fama, E., & French, K. (1996). Multifactor explanations of asset pricing anomalies. Journal of Finance, 51(1), 55–84.
18. Ferreira, M. A., Keswani, A., Miguel, A. F., & Ramos, S. B. (2013). The determinants of mutual fund performance: A cross-country study. Review of Finance, 17(2), 483–525.
19. Ferruz, L., Munoz, F., & Vargas, M. (2012). Managerial abilities: Evidence from religious mutual fund managers. Journal of Business Ethics, 105(4), 503–517.
20. Golec, J. H. (1996). The effects of mutual fund managers’ characteristics on their portfolio performance, risk, and fees. Financial Services Review, 5(2), 133–148.
21. Hong, H., & Kacpercyzk, M. (2009). The price of sin: the effects of social norms on markets. Journal of Financial Economics, 93(1), 15–36.
22. Hussein, K., & Omran, M. (2005). Ethical investment revisited: Evidence from Dow Jones Islamic Indices. Journal of Investing, 14(3), 105–124.
23. Indro, D. C., Jiang, C. X., Hu, M. Y., & Lee, W. Y. (1999). Mutual fund performance: Does fund size mater? Financial Analysts Journal, 55(3), 74–87.
24. Kreander, N., Gray, R. H., Power, D. M., & Sinclair, C. D. (2005). Evaluating the performance of ethical and non-ethical funds: A matched pair analysis. Journal of Business Finance and Accounting, 32(7–8), 1465–1493.
25. Kuran, T. (2005). The logic of financial westernization in the Middle East. Journal of Economic Behavior & Organization, 56(4), 593–615.
26. Lee, D. D., Humphrey, J. E., Benson, K. L., & Ahn, J. Y. K. (2010). Socially responsible investment fund performance: The impact of screening intensity. Accounting and Finance, 50(2), 351–370.
27. Lewis, J. B., & Linzer, D. A. (2005). Estimating regression models in which the dependent variable is based on estimates. Political Analysis, 13(4), 345–364.
28. Mallin, C. A., Saadouni, B., & Briston, R. J. (1995). The financial performance of ethical investment funds. Journal of Business Finance and Accounting, 22(4), 483–496.
29. Margolis, J., Elfenbein, H., & Walsh, J. (2007). Does it pay to be good? A meta-analysis and redirection of research on the relationship between corporate social and financial performance. Working paper. Harvard Business School, Boston. Retrieved December 12, 2014. from http://www.hks.harvard.edu/m-rcbg/papers/seminars/margolis_november_07.pdf.
30. Nainggolan, Y., How, J., & Verhoeven, P. (2014). The Shariah advisory board and Shariah compliance risk of Islamic equity funds. Working Paper. Queensland University of Technology, Queensland.
31. Pew Research Centre. (2009). Mapping the global Muslim population: A report on the size and distribution of the world’s Muslim population. Retrieved December 19, 2014, from http://www.pewforum.org/2009/10/07/mapping-the-global-muslim-population/
32. Porter, M. E., & Kramer, M. R. (2006). Strategy and society: The link between competitive advantage and corporate social responsibility. Harvard Business Review, 84(12), 78–92.
33. Renneboog, L., Ter Horst, J., & Zhang, C. (2008a). Socially responsible investments: Institutional aspects, performance, and investor behavior. Journal of Banking & Finance, 32(9), 1723–1742.
34. Renneboog, L., Ter Horst, J., & Zhang, C. (2008b). The price of ethics and stakeholder governance: The performance of socially responsible mutual funds. Journal of Corporate Finance, 14(3), 302–322.
35. Sandberg, J., Juravle, C., Hedesström, T. M., & Hamilton, I. (2008). The heterogeneity of socially responsible investment. Journal of Business Ethics, 87(4), 519–533.
36. Saxonhouse, G. R. (1976). Estimated parameters as dependent variables. American Economic Review, 66(1), 178–183.
37. Securities Commission Malaysia. (2007). Resolutions of the Securities Commission Shariah Advisory Council (2nd ed., pp. 162–163). Kuala Lumpur: Securities Commission Malaysia.
38. Sharpe, W. F. (1992). Asset allocation: Management style and performance measurement. Journal of Portfolio Management, 18(2), 7–19.
39. Webley, P., Lewis, A., & Mackenzie, C. (2001). Commitment among ethical investors: An experimental approach. Journal of Economic Psychology, 22(1), 27–42.
40. Wilson, R. (1997). Islamic finance and ethical investment. International Journal of Social Economics, 24(11), 1325–1342.
41. Yeyati, E.L., Schmukler, S.L., and Horen, N.V. (2008). Crises, capital controls, and financial integration. Working paper. World Bank. Retrieved December 19, 2014, from http://elibrary.worldbank.org/doi/pdf/10.1596/1813-9450-4770.