Andreas G. F. Hoepner

Islamic Mutual Funds’ Financial Performance and International Investment Style: Evidence from 20 Countries

We pursue the first large-scale investigation of a strongly growing mutual fund type: Islamic funds. Based on an unexplored, survivorship bias-adjusted data set, we analyse the financial performance and investment style of 265 Islamic equity funds from 20 countries. As Islamic funds often have diverse investment regions, we develop a (conditional) three-level Carhart model to simultaneously control for exposure to different national, regional and global equity markets and investment styles. Consistent with recent evidence for conventional funds, we find Islamic funds to display superior learning in more developed Islamic financial markets. While Islamic funds from these markets are competitive to international equity benchmarks, funds from especially Western nations with less Islamic assets tend to significantly underperform. Islamic funds’ investment style is somewhat tilted towards growth stocks. Funds from predominantly Muslim economies also show a clear small cap preference. These results are consistent over time and robust to time varying market exposures and capital market restrictions.

Does stakeholder pressure influence corporate GHG emissions reporting? Empirical evidence from Europe

Purpose - – The purpose of this paper is to seek to shed light on the practice of incomplete corporate disclosure of quantitative Greenhouse gas (GHG) emissions and investigates whether external stakeholder pressure influences the existence, and separately, the completeness of voluntary GHG emissions disclosures by 431 European companies. Design/methodology/approach - – A classification of reporting completeness is developed with respect to the scope, type and reporting boundary of GHG emissions based on the guidelines of the GHG Protocol, Global Reporting Initiative and the Carbon Disclosure Project. Logistic regression analysis is applied to examine whether proxies for exposure to climate change concerns from different stakeholder groups influence the existence and/or completeness of quantitative GHG emissions disclosure. Findings - – From 2005 to 2009, on average only 15 percent of companies that disclose GHG emissions report them in a manner that the authors consider complete. Results of regression analyses suggest that external stakeholder pressure is a determinant of the existence but not the completeness of emissions disclosure. Findings are consistent with stakeholder theory arguments that companies respond to external stakeholder pressure to report GHG emissions, but also with legitimacy theory claims that firms can use carbon disclosure, in this case the incomplete reporting of emissions, as a symbolic act to address legitimacy exposures. Practical implications - – Bringing corporate GHG emissions disclosure in line with recommended guidelines will require either more direct stakeholder pressure or, perhaps, a mandated disclosure regime. In the meantime, users of the data will need to carefully consider the relevance of the reported data and develop the necessary competencies to detect and control for its incompleteness. A more troubling concern is that stakeholders may instead grow to accept less than complete disclosure. Originality/value - – The paper represents the first large-scale empirical study into the completeness of companies’ disclosure of quantitative GHG emissions and is the first to analyze these disclosures in the context of stakeholder pressure and its relation to legitimation.

Corporate Social Responsibility Across Industries: When Can Who Do Well by Doing Good?

While much of the previous literature considers whether corporate social responsibility (CSR) pays, we take a more nuanced perspective, theoretically and empirically, by investigating when CSR pays and for whom‘ Theoretically, we develop two contingency perspectives. First, we extend previous work to argue that CSR’s impacts on corporate financial performance (CFP) are moderated by five factors: CSR form, firm characteristics, time, national framework and industrial characteristics. Focusing on industrial characteristics, we theorise that differences in industries’ dependency on certain stakeholder groups, their proximity to the end consumer, their potential for social and environmental damages and their level of product/service differentiation moderate CSR’s value relevance. Our second contingency perspective considers for whom CSR might pay. While previous research has almost exclusively viewed CSR’s value from a corporate perspective, we argue that stakeholders, government, and investor perspective are also relevant. Empirically, we analyse CSR’s value across ten industry sectors from a corporate and investor aspect, respectively. We find that CSR has substantial value for corporations in the health care, industrials, and consumer discretionary sectors but not elsewhere. Publicly informed investors can exploit this positive CSR effect in the former two industries, which yields significantly abnormal excess returns of more than 6% and 8.5% per annum, respectively. Hence, we consider our results strong evidence to reject the implicit hypothesis which underpins much of the previous work that explores the homogeneous CSR-CFP relationship across industries. Our results suggest to academics that many previous studies on CSR value, which controlled for the industrial drivers of CFP but not for the industrial drivers of the CSR-CFP link, might need to be reestimated. Furthermore, for practitioners, our study implies that CSR value should be assessed in the context of the industrial business processes.

Social, Environmental, Ethical and Trust (SEET) Issues in Banking: An Overview

Interest in Social, Environmental, Ethical and Trust (SEET) in banking has experienced a rapid growth over the last decade. This paper provides the first overview of SEET issues in banking. The overview introduces international initiatives such as: the United Nations Environmental Programme Finance Initiative; the Equator Principles; and the United Nations Principles for Responsible Investment, which highlighted the importance of SEET issues to the financial services industry. Finally, we provide a structured review of the small, but important literature on SEET issues in banking. Our overview is timely given the increasing importance of trust and environmental phenomena to the financial services industry. Consequently, the material presented in this overview is of relevance to academics, policy makers and practitioners alike.

Social, Environmental, and Trust Issues in Business and Finance

This chapter discusses social, environmental and trust issues relating to business and finance in a historical context. Social issues relating to the concerned societal groups emerged since the mid of the 20th century and have had increasing impact on business ever since. Environmental issues and concerns about social conditions of third parties (e.g. Vietnam war) followed. Recently, societal groups have also voiced anxieties about the trustworthiness of certain businesses, especially large financial institutions. These societal trends can be business relevant in a positive and negative way. Managing these stakeholder concerns can, for instance, build trust and consumer loyalty but it also costs corporate resources. The chapter closes with an outlook on social, environmental and trust issues in the 21st century. Due to a consistently increasing complexity of business and finance and a similarly consistently increasing speed of information exchange among concerned stakeholders (e.g. via social media), it is believed that especially trust based businesses such as financial institutions will be increasingly faced with the challenges and opportunities resulting from societal concerns about social, environmental and trust issues.

PLEASE CITE THIS: an exploratory paper on citations, impacts and the social accounting literature

This paper seeks to use the increasingly influential citation and impact data to explore the contours of the social and environmental accounting (SEA) literature. Our ambitions are fourfold. First, we offer a more nuanced understanding of the journals in which we tend to publish SEA research. Second, we tease out what might plausibly be thought to be one indication of the ‘most influential’ SEA papers. Third, we offer a substantive cautionary note about the dangers of the careless use of citations as singular measures of ‘quality’ or ‘importance’, etc. Finally, we place the growing SEA literature in a wider context which both flatters and challenges the community that SEAJ seeks to serve.

Media coverage of climate change: an international comparison

We present an international comparison of broadsheet newspaper coverage of climate change. We employ two complementary theoretical lenses, multiple streams theory and institutional theory, to explore why climate change has become headline news in some countries but has received comparatively little coverage in others. The study utilises a worldwide sample across 41 different countries for the year 2008, covering 113 leading national broadsheet newspapers. A cross-sectional regression model is used to identify whether and how a range of contextual factors impact coverage of climate change. To a certain extent, a country’s direct exposure to climate change and the measures that have been taken to combat global warming influence the position of climate change on the media agenda. Crucially, however, we identify a number of contextual factors that impact climate change-related media coverage in different national contexts. In particular, we find a significantly positive relationship between regulatory quality and levels of media coverage. At the same time, unemployment trends are significantly negatively related to media attention to climate change. Gross domestic product per capita does not help to explain levels of climate change-related media coverage. In other words, climate change appears to have moved beyond simply being a ‘rich country issue’.

Vitamin D supplementation differentially affects seasonal multiple sclerosis disease activity.

Low ultraviolet‐B (UVB) radiation causes hypovitaminosis D, which is a known risk factor for multiple sclerosis (MS) and associated with MS disease activity. Our objective is to test whether vitamin D supplementation is most effective in lowering disease activity during the period of the year with low UVB radiation and consequently low serum 25‐hydroxyvitamin D3 (25(OH)D3) concentration.

Operationalizing socially responsible investment: a non-financial fiduciary duty problem

An ever increasing body of literature is focusing on the role of the fiduciary duty principle in socially responsible investment (SRI). Typically, this body of literature emphasizes the relationship between non-financial considerations of fund managers and financial return. Generally speaking, trustees are to manage their funds in ways that best represent the financial interests of their investors. The rise of SRI however continues to give evidence that a fair share of such investors have more than purely financial interests. Consequently, even in cases where the fiduciary duty principle is not violated by way of insufficient financial returns, a non-financial fiduciary duty problem may exist. We argue that this non-financial fiduciary duty problem is aggravated by differences in the sustainability-related perceptions and priorities of SRI practitioners and beneficiaries. SRI practitioners are shown to form a relatively homogeneous epistemic community across national borders. From the perspective of ESG integration, this in turn creates an agency problem. This agency problem is mainly relevant for value-driven investors and ESG integration. Alongside the continued mainstreaming and maturing of SRI, practitioners will increasingly need to find ways to address these non-financial fiduciary responsibilities. WP No 13-002

SRI Funds: Does More Social Mean Less Financial Performance?

Due to the diversity amongst SRI funds it is too simplistic to divide the mutual fund universe in two blocks of SRI (socially responsible investment) funds and conventional funds. Therefore, we use a unique rating of UK SRI funds, which takes into account the screening criteria as well as the rigorousness of their application. In order to analyse the relationship between social and financial performance we use the 3-level-Carhart model. The underlying sample consists of 50 UK SRI funds whose returns between July 1998 and July 2010 are analysed. The results show that the portfolios with the highest social ratings underperform significantly, whilst the portfolios with the lowest social ratings do not significantly underperform the market benchmark. However, the analyses do not reveal a clear linear pattern. Therefore, more social performance does not automatically mean less financial performance.