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1 – 4 of 4Alexandra Horobet, Birjees Rahat, Ana-Maria Floarea and Lucian Belascu
This paper aims to examine the link between environmental policies and financial markets, with a particular focus on the banking sector. The assessment of banks is based on their…
Abstract
Purpose
This paper aims to examine the link between environmental policies and financial markets, with a particular focus on the banking sector. The assessment of banks is based on their environmental impact, social responsibility and governance practices.
Design/methodology/approach
A panel data regression model is used to examine the link between ROE and systematic risk, on the one hand, and European banking institutions’ ESG scores and its environmental, social and governance (ESG) pillar scores, as well as other financial indicators, on the other hand. The timeframe of the research is 10 years and includes 61 European banks, thus providing an extensive review of existing literature and empirical analysis to reveal the complex link between environmental policies, ESG performance and financial performance in the banking sector.
Findings
Better ESG performance is associated with lower ROE but also lower systematic risk for European banks. An improved environmental and social performance leads to higher ROE and lower beta coefficients. However, higher governance scores depress ROE.
Originality/value
The paper aims to contribute to the existing literature by showcasing a complex link between ESG practices and financial performance, focusing extensively on the banking sector. This research analyses how ESG initiatives, when implemented within banks, influence key financial metrics such as profitability, risk management and long-term sustainability. It also examines the unique challenges and opportunities that banks face in aligning ESG goals with financial objectives. Through this thorough analysis of the banking sector, the study adds depth to the current discourse on the broader impact of ESG practices on the financial performance of companies.
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Nawazish Mirza, Cristiana Doina Tudor, Alexandra Horobet and Lucian Belascu
This study aims to explore the strategic integration of Sharia-compliant and environmental, social and governance (ESG)-focused investments within global equity portfolio…
Abstract
Purpose
This study aims to explore the strategic integration of Sharia-compliant and environmental, social and governance (ESG)-focused investments within global equity portfolio optimization frameworks, with a particular emphasis on variance minimization and dynamic rebalancing techniques.
Design/methodology/approach
The research uses historical data from Sharia-compliant, ESG-focused and conventional equity exchange-traded funds (ETFs). Advanced mean-variance optimization methodologies via quadratic programming are employed, encompassing static optimization with and without a 50% cap on individual asset weights, dynamic optimization with monthly rebalancing and rolling window optimization.
Findings
Portfolios integrating Sharia-compliant investments frequently outperform those composed solely of conventional equity ETFs. Dynamic optimization with monthly rebalancing achieved the highest Sharpe ratio (1.3708) and demonstrated enhanced portfolio resilience during market turbulence, such as the COVID-19 pandemic. Sharia-compliant investments showed substantial allocations during key periods, with weights reaching up to 100% in the first half of 2020. In contrast, ESG-focused investments exhibited more limited and sporadic allocations, reflecting a more opportunistic role in the portfolio.
Practical implications
The findings reaffirm the critical role of Sharia-compliant investments in well-diversified, risk-conscious portfolios while also providing nuanced insights into the more selective integration of ESG-focused assets. The results offer practical guidance for portfolio managers seeking to integrate ethical and sustainable investment principles within advanced portfolio optimization frameworks, particularly when focusing on minimizing variance and dynamically responding to evolving market conditions.
Social implications
The study contributes to the growing body of literature on ethical and sustainable investments, demonstrating that it is possible to balance ethical considerations with robust financial performance. The research underscores the potential for Sharia-compliant investments to play a significant role in global portfolios, potentially fostering greater financial inclusion and cross-cultural understanding in the investment community.
Originality/value
This research provides novel insights by focusing on Sharia-compliant investments within non-Muslim countries, an area that has been relatively underexplored. It also compares the outcomes of static, dynamic and rolling optimizations, highlighting the dynamic interplay between ethical investment principles and financial performance.
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Luminița Nicolescu and Florentin Gabriel Tudorache
This paper aims to make an analysis of investment behaviour in mutual funds, by looking at different investment decision influencers and trying to identify the extent to which the…
Abstract
Purpose
This paper aims to make an analysis of investment behaviour in mutual funds, by looking at different investment decision influencers and trying to identify the extent to which the investment decision is knowledge-based. The paper has three main purposes, namely, to assess the degree to which the considered factors influence investment decision-making in young capital markets from Central and Eastern Europe (CEE); to compare the investment behaviour in the three considered countries; and to characterise investment behaviour in periods of economic turbulence.
Design/methodology/approach
The researchers considered a model of investment behaviour comprising six influencing factors. Inferential statistics through multiple linear regression was applied using the MATLAB R2014a software. The decision to invest was measured by the flow of new capital attracted by the fund (dependent variable) and the considered influencing factors (independent variables) were: the size of the fund, the risk associated to the fund, the growth of the fund, the growth of the fund category, the performance of the fund in its category. The research was conducted in Romania, Slovakia and Hungary. The period of study included the global economic crisis of 2007-2008.
Findings
The results illustrated that all considered factors do have an influence on the investment behaviour of investors in CEE, but with different levels of impact. The study concludes that the investment decision is partially knowledge-based, as investors in the region consider only some of the available information when making the decision to invest. Investment behaviour of investors in CEE is rather similar than dissimilar when deciding to invest in mutual funds. However, based on the differences between countries, it can be stated that the Hungarian investor is more mature and more informed than the others, when making investment decisions.
Originality/value
The study contributes to the exiting literature through the analysis of investment behaviour in young capital markets that are less studied in the literature. The limited number of studies considering mutual funds, usually comprise one fund category, while the present research considers all five most prevalent mutual funds categories for the studied period. It also contributed by collecting data from a less studied geographical region, CEE with three specific case studies, namely, Romania, Slovakia and Hungary that are looked at in a comparative manner.
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Prihana Vasishta, Ankita Dhiman, Shagun Smith and Anju Singla
This study systematically reviews the role of decentralized finance (DeFi) in enhancing the quality, affordability, access and usage of financial services, specifically targeting…
Abstract
Purpose
This study systematically reviews the role of decentralized finance (DeFi) in enhancing the quality, affordability, access and usage of financial services, specifically targeting underserved populations. The aim is to investigate DeFi’s potential in addressing financial exclusion and promoting global financial inclusion.
Design/methodology/approach
A systematic literature review was conducted, analyzing 67 peer-reviewed articles. The review focused on extracting actionable insights and recommendations regarding DeFi’s impact on financial inclusion.
Findings
The study reveals that DeFi, through the utilization of blockchain technology, can significantly improve accessibility, affordability and usability of financial services. By eliminating intermediaries and reducing entry barriers, DeFi platforms democratize finance and support financial inclusion on a global scale. The research identifies specific mechanisms through which DeFi can enhance financial services for marginalized communities, including decentralized lending, digital wallets and blockchain-based remittances.
Research limitations/implications
The study is constrained by the current literature and data availability on DeFi’s impact on financial inclusion. Future research should explore the scalability, sustainability and long-term effects of DeFi solutions in diverse contexts.
Originality/value
This research uniquely contributes to the literature by examining the intersection of DeFi and financial inclusion, providing innovative approaches to overcoming financial exclusion. The study highlights DeFi’s potential to transform financial services and empower underserved populations economically.
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