The price of ethics and stakeholder governance : the performance of socially responsible mutual funds
Renneboog, Luc, Horst, Jenke ter and Zhang, Chendi. (2008) The price of ethics and stakeholder governance : the performance of socially responsible mutual funds. Journal of Corporate Finance, Vol.14 (No.3). pp. 302-322. ISSN 0929-1199Full text not available from this repository.
Official URL: http://dx.doi.org/10.1016/j.jcorpfin.2008.03.009
Do investors pay a price for investing in socially responsible investments (SRI) funds, or do they obtain superior returns? This paper investigates these under- and overperformance hypotheses for all SRI funds across the world. Consistent with investors paying a price for ethics, SRI funds in the US, the UK, and in many continental European and Asia-Pacific countries underperform their domestic benchmarks by -2.2% to -6.5%. However, with the exception of some countries such as France, Japan and Sweden, the risk-adjusted returns of SRI funds are not statistically different from the performance of conventional funds. We also find that the underperformance of SRI funds is not driven by loadings on an ethics style factor. There is mixed evidence of a smart money effect: SRI investors are unable to identify the funds that will outperform in the future, whereas they show some fund-selection ability in identifying funds that will perform poorly. Finally, corporate governance and social screens yield lower risk-adjusted returns. (c) 2008 Elsevier B.V. All rights reserved.
|Item Type:||Journal Article|
|Subjects:||H Social Sciences > HG Finance|
|Divisions:||Faculty of Social Sciences > Warwick Business School > Finance Group
Faculty of Social Sciences > Warwick Business School
|Library of Congress Subject Headings (LCSH):||Mutual funds, Investments -- Moral and ethical aspects, Stockholders, Social responsibility of business|
|Journal or Publication Title:||Journal of Corporate Finance|
|Publisher:||Elsevier Science BV|
|Official Date:||June 2008|
|Number of Pages:||21|
|Page Range:||pp. 302-322|
|Access rights to Published version:||Restricted or Subscription Access|
Paper presented at: Symposium on Contractual Corporate Governance, University of Sheffield, England, Jun 22, 2007
|Type of Event:||Conference|
Akerlof, G., 1980. A theory of social custom, of which unemployment may be one consequence. Quarterly Journal of Economics 94, 749–775.
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