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1 – 5 of 5Abdul Qoyum, Rizqi Umar AlHashfi, Mamduh Mahmadah Hanafi, Hassanudin Mohd Thas Thaker and Jaenal Effendi
This study aims to empirically investigates the effect of the COVID-19 pandemic on ethical and nonethical stocks in Indonesia. Ethical stocks which are characterized by…
Abstract
Purpose
This study aims to empirically investigates the effect of the COVID-19 pandemic on ethical and nonethical stocks in Indonesia. Ethical stocks which are characterized by moral-based companies’ activities and lower debt are expected to have better resilience during the COVID-19 crisis compared to nonethical stock.
Design/methodology/approach
This study observes 589 firms of ethical and nonethical stock during sample periods ranging from March 2, 2020 (first case announced) to June 30, 2021. Panel regression, with some control variables, was applied.
Findings
Testing firms in Indonesia revealed a significant difference in stock resilience, in which ethical stock has a better resilience compared to nonethical, with Islamic socially responsible investment (SRI) stock having the highest resilience, followed by Islamic stock and then SRI stock. This study documents a significant effect of some financial criteria on the stock resilience, namely, return market (RM), market capitalization (MCAP) and share turnover (TURN). Overall, after splitting the sample into different time horizons, this study consistently reveals that ethical firms have better resilience compared to nonethical stocks.
Research limitations/implications
This study makes several contributions to the literature on Islamic finance, especially concerning Islamic screening with SRI factors. In practical terms, this study supports the argument that focusing on integrating environmental, social and governance criteria in sharia screening will improve the quality of Islamic firms. The “Islamic” label is not only a marketing label but also a quality certification.
Originality/value
This study can be used as a reference for developing Islamic finance more focused on sustainability issues including socioeconomic and human development by improving the quality of screening of Islamic firms. Therefore, this study suggests that the establishment of Islamic SRI index is very crucial and significant to promote ethical-based investment.
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Bernard Paranque and Elias Erragragui
The objective of this chapter is twofold. It first explores the complementarities of Islamic investment with Socially Responsible Investment. Secondly, it examines the financial…
Abstract
Purpose
The objective of this chapter is twofold. It first explores the complementarities of Islamic investment with Socially Responsible Investment. Secondly, it examines the financial price, for investors, of being both shariah-compliant and socially responsible.
Methodology/approach
Using a value-weighted approach, we experiment the construction of a set of sharia-compliant stock portfolios with different Environmental, Social, and Governance (ESG) performance. We use the KLD ratings of 238 companies listed in U.S. stock market from 2007 to 2011. We measure and compare their performance using the model developed by Fama and French (1993) and extended by Carhart (1997).
Findings
The results indicate no adverse effect on returns due to the application of a double screening, Islamic and SRI, and show a substantially higher performance for positive governance screen during 2008–2011 periods. This outperformance cannot be explained by differences in investment style. Though, we observe significant outperformance for some ‘irresponsible’ portfolios involved in community and human rights controversies.
Research limitations/implications
The study only focuses on U.S. market. Future works should extend the experimentation to other markets.
Practical implications
This study provides a venue for Islamic funds managers to consider SRI screening as fully in line with shariah-compliance requirements, while preserving the performance of their portfolios.
Social implications
Potentially, the reconciliation of Islamic investment with positive SRI practices may foster the implementation of CSR policies by firms’ manager willing to attract Islamic investors.
Originality/value
With reference to the many studies emphasising the compatibility between CSR criteria and Islamic principles, this experimental study is the first to investigate the integration of a positive screening process designed to select companies based on their ESG performance in addition to a traditional shariah-compliant screening.
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