Do social factors influence investment behavior and performance? Evidence from mutual fund holdings

Borgers, Arian C.T.; Derwall, Jeroen; Koedijk, Kees; Horst, Jenke ter

doi:10.1016/j.jbankfin.2015.07.001

Cited by 126 publications

(80 citation statements)

References 55 publications

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“…Similarly, the concept of ESG investing is of interest to many researchers [13][14][15][16][17][18][19]. However, the motives, expectations, behavior and characteristics of fund managers investing in ESG stocks are much less often explored in the literature.…”

Section: Esg and Fund Managers-review Of The Literaturementioning

confidence: 99%

“…Some studies state that investors should not expect any abnormal returns from investment in ESG stocks [15,19,70], while other report the positive influence of ESG screening on financial performance. This positive impact on corporate financial results derives from the maximization of shareholder value [71], reputation-related benefits [72,73] cost and risk reduction [74,75], and lower stock price volatility [76].…”

Section: Esg and Shareholder Value Creationmentioning

confidence: 99%

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ESG Issues among Fund Managers—Factors and Motives

Przychodzeń¹,

Gómez‐Bezares

Przychodzeń

et al. 2016

Sustainability

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This paper investigates the motives, behavior, and characteristics shaping mutual fund managers' willingness to incorporate Environmental, Social and Governance (ESG) issues into investment decision making. Using survey evidence from fund managers from five different countries, we demonstrate that this predisposition is the stronger, the shorter their average forecasting horizon and the higher their level of reliance on business risk in portfolio management is. We also find that the propensity to incorporate ESG factors is positively related to an increasing level of risk aversion, an increasing importance of salary change and senior management approval/disapproval as motivating factors as well as length of professional experience in current fund and increasing significance of assessment by superiors in remuneration. Overall, our evidence suggests that ESG diligence among fund managers serves mainly as a method for mitigating risk and is typically motivated by herding; it is much less important as a tool for additional value creation. The prevalent use of ESG criteria in mitigating risk is in contrast with traditional approach, but it is in line with behavioral finance theory. Additionally, our results also show a strong difference in the length of the forecasting horizon between continental European and Anglo-Saxon fund managers.

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Section: Esg and Fund Managers-review Of The Literaturementioning

confidence: 99%

Section: Esg and Shareholder Value Creationmentioning

confidence: 99%

ESG Issues among Fund Managers—Factors and Motives

Przychodzeń¹,

Gómez‐Bezares

Przychodzeń

et al. 2016

Sustainability

View full text Add to dashboard Cite

show abstract

“…Several initiatives such as the UN Global Compact, the United Nations backed Principles for Responsible Investment (UN PRI), the Global Reporting Initiative (GRI), the Carbon Disclosure Project (CDP), the Sustainability Accounting Standards Board (SASB), and the American and European SRI markets have contributed to this phenomenal growth of socially responsible investments. studies suggest that high-CSR funds produce poorer performance relative to low-CSR funds (e.g., El Ghoul and Karoui 2017) or to mutual funds that hold more "sin" stocks (Borgers et al 2015), while others find the relationship is insignificant or only holds in some circumstances (e.g., Renneboog et al 2008). Most of these studies suffer from small sample sizes as they investigate only a handful of dedicated SRI mutual funds (funds that explicitly include their SRI objectives in their prospectuses).…”

Section: Introductionmentioning

confidence: 99%

Financial Crisis and Corporate Social Responsible Mutual Fund Flows

Parida

Wang

2018

IJFS

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Abstract:In this paper, we investigate investment flows into mutual funds that hold more high corporate social responsible stocks (top CSR funds) vs. mutual funds that hold more low corporate social responsible stocks (bottom CSR funds). Using a large sample of equity mutual funds spanning 2003-2012, we find that top CSR funds on average receive about 5% less investment per annum compared to the other funds; whereas bottom CSR funds receive about 5.6% more investments. These relative negative and positive flows into the top and bottom CSR funds respectively were larger during the pre-financial crisis period (2003)(2004)(2005)(2006)(2007). This trend, however, reversed during the financial crisis (2008)(2009). Top CSR funds attracted about 8.7% more investments during the financial crisis compared to the pre-crisis period; whereas bottom CSR funds received about 9.8% less investment. This higher investment into the top CSR funds during the crisis seems to have disappeared during the post-crisis period (2009)(2010)(2011)(2012). Additional analysis shows that the corporate social ratings of top CSR funds improved through the crisis, whereas it deteriorated for the bottom CSR funds. Our findings are consistent with the "flight to quality" phenomenon observed in financial markets during market crises, indicating that investors perceive top CSR fund investments as relatively safe or of higher quality and hence, invest more in them during financial crises.

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“…However, active screening can effectively reduce the risk of the fund, while the negative screening will increase the risk of the fund, thereby reducing the diversity of fund selection. Borgers et al [11], who show that funds with higher exposure to sin stocks display higher risk-adjusted …”

Section: Green Fund Environmental Objectivesmentioning

confidence: 99%

Environmental Performance and Financial Performance of Green Mutual Fund—Evidence from China

Yin¹

2017

OJBM

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We compared the environmental performance and financial performance between green fund and non-green fund to explore the balance between environmental goals and financial objectives of green funds by in the context of China government's strong advocacy of "developing green finance and setting up green development fund". In this paper, the open-ended active fund with the shareholding ratio of over 75% is taken as the object of study. By the PSM method, 28 green funds are matched by 1:5 to obtain 140 non-green funds. Through the large sample data of 2010-2016, the results show that: 1) the green fund investment portfolio is cleaner than non-green fund. From the long-term environmental performance of the holding enterprises, the green and the non-green fund's environmental performance and financial performance are tested empirically. Fund environmental performance is better than non-green fund. From the perspective of the short-term environmental performance of the holding enterprises, there is no difference between the environmental performance of the green fund and the non-green fund. 2) The excess return of the green fund is higher than that of the non-green fund. In the period of China's economic transformation, green funds not only assume the responsibility of investing in environmental performance of enterprises, but also take into account its financial performance, to achieve a win-win result of low pollution and high yield.

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Do social factors influence investment behavior and performance? Evidence from mutual fund holdings

Cited by 126 publications

References 55 publications

ESG Issues among Fund Managers—Factors and Motives

ESG Issues among Fund Managers—Factors and Motives

Financial Crisis and Corporate Social Responsible Mutual Fund Flows

Environmental Performance and Financial Performance of Green Mutual Fund—Evidence from China

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