Can SRI funds better resist global financial crisis? Evidence from Japan

Miwa Nakai; Keiko Yamaguchi; Kenji Takeuchi

doi:10.1016/j.irfa.2016.09.002

Can SRI funds better resist global financial crisis? Evidence from Japan

Miwa Nakai, Keiko Yamaguchi, Kenji Takeuchi

Research output: Contribution to journal › Article › peer-review

30 Citations (Scopus)

Abstract

This paper compared Socially Responsible Investment (SRI) funds and conventional funds in the Japanese market with respect to the impact of the global financial crisis in 2008. Taking the bankruptcy of Lehman Brothers as a particular event, we estimated the average cumulative abnormal returns of both funds by event study methodology using a Fama–French three-factor model and EGARCH model. Our results suggest that SRI funds better resisted the bankruptcy of the Lehman Brothers than conventional funds. We also found that this result can be attributed to the existence of international funds, possibly because investors might evaluate the CSR activities of international firms more than those of domestic firms. Alternatively, it can be interpreted that the universe of domestic SRI funds is too limited to enjoy risk diversification.

Original language	English
Pages (from-to)	12-20
Number of pages	9
Journal	International Review of Financial Analysis
Volume	48
DOIs	https://doi.org/10.1016/j.irfa.2016.09.002
Publication status	Published - Dec 1 2016

Keywords

Event study
Financial crisis
Socially responsible investment

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.irfa.2016.09.002

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abstract = "This paper compared Socially Responsible Investment (SRI) funds and conventional funds in the Japanese market with respect to the impact of the global financial crisis in 2008. Taking the bankruptcy of Lehman Brothers as a particular event, we estimated the average cumulative abnormal returns of both funds by event study methodology using a Fama–French three-factor model and EGARCH model. Our results suggest that SRI funds better resisted the bankruptcy of the Lehman Brothers than conventional funds. We also found that this result can be attributed to the existence of international funds, possibly because investors might evaluate the CSR activities of international firms more than those of domestic firms. Alternatively, it can be interpreted that the universe of domestic SRI funds is too limited to enjoy risk diversification.",

keywords = "Event study, Financial crisis, Socially responsible investment",

author = "Miwa Nakai and Keiko Yamaguchi and Kenji Takeuchi",

note = "Funding Information: This work was supported by JSPS KAKENHI Number JP26241033 . The earlier version of this article was presented at seminars held at Kobe University and at the 16th Annual Meeting of Society for Environmental Economics and Policy Studies. The authors are grateful to Prof. Masanobu Ishikawa, Prof. Kentaro Iwatsubo, and seminar participants at Kobe University for their invaluable comments. Activities of the Presidential Endowed Chair for “Platinum Society” at The University of Tokyo were supported by the KAITEKI Institute, Inc., Nippon Telegraph and Telephone Corporation, Fujifilm Holdings Corporation, Mitsui Fudosan Co. Ltd., LIXIL Corporation, and Shin-Etsu Chemical Co., Ltd. Publisher Copyright: {\textcopyright} 2016 Elsevier Inc.",

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doi = "10.1016/j.irfa.2016.09.002",

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AU - Nakai, Miwa

AU - Yamaguchi, Keiko

AU - Takeuchi, Kenji

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PY - 2016/12/1

Y1 - 2016/12/1

N2 - This paper compared Socially Responsible Investment (SRI) funds and conventional funds in the Japanese market with respect to the impact of the global financial crisis in 2008. Taking the bankruptcy of Lehman Brothers as a particular event, we estimated the average cumulative abnormal returns of both funds by event study methodology using a Fama–French three-factor model and EGARCH model. Our results suggest that SRI funds better resisted the bankruptcy of the Lehman Brothers than conventional funds. We also found that this result can be attributed to the existence of international funds, possibly because investors might evaluate the CSR activities of international firms more than those of domestic firms. Alternatively, it can be interpreted that the universe of domestic SRI funds is too limited to enjoy risk diversification.

AB - This paper compared Socially Responsible Investment (SRI) funds and conventional funds in the Japanese market with respect to the impact of the global financial crisis in 2008. Taking the bankruptcy of Lehman Brothers as a particular event, we estimated the average cumulative abnormal returns of both funds by event study methodology using a Fama–French three-factor model and EGARCH model. Our results suggest that SRI funds better resisted the bankruptcy of the Lehman Brothers than conventional funds. We also found that this result can be attributed to the existence of international funds, possibly because investors might evaluate the CSR activities of international firms more than those of domestic firms. Alternatively, it can be interpreted that the universe of domestic SRI funds is too limited to enjoy risk diversification.

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KW - Socially responsible investment

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Can SRI funds better resist global financial crisis? Evidence from Japan

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Keywords

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