{"title":"Asset pricing in a country embracing religious beliefs and social norms: Evidence from the Indonesian stock market","authors":"Ridwan Gunawan , Katsushi Nakajima","doi":"10.1016/j.bir.2024.12.005","DOIUrl":null,"url":null,"abstract":"<div><div>The debate surrounding the financial performance of Shariah compliance (SC) and socially-responsible (SR) investments versus traditional ones remains controversial. This study pioneers an examination of this issue within Indonesia, a country where SC Investments (SCIs) and SR Investments (SRIs) are government priorities and widely embraced by investors. Our analysis, from July 2009 to June 2021, employing well-known five-factor and cross-section models, reveals that SCI underperforms conventional benchmarks, whereas SRI exhibits resilience. Our findings also suggest that investor preferences may contribute to the overvaluation of SCI and SRI assets. Additionally, we extend the existing literature by exploring corporate financing strategies, highlighting a preference for capital markets over bank borrowing among SC and SR companies. This research illuminates the multifaceted dynamics of SCIs and SRIs in a region prioritizing ethics and sustainability.</div></div>","PeriodicalId":46690,"journal":{"name":"Borsa Istanbul Review","volume":"25 2","pages":"Pages 227-239"},"PeriodicalIF":6.3000,"publicationDate":"2025-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Borsa Istanbul Review","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S2214845024001595","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
The debate surrounding the financial performance of Shariah compliance (SC) and socially-responsible (SR) investments versus traditional ones remains controversial. This study pioneers an examination of this issue within Indonesia, a country where SC Investments (SCIs) and SR Investments (SRIs) are government priorities and widely embraced by investors. Our analysis, from July 2009 to June 2021, employing well-known five-factor and cross-section models, reveals that SCI underperforms conventional benchmarks, whereas SRI exhibits resilience. Our findings also suggest that investor preferences may contribute to the overvaluation of SCI and SRI assets. Additionally, we extend the existing literature by exploring corporate financing strategies, highlighting a preference for capital markets over bank borrowing among SC and SR companies. This research illuminates the multifaceted dynamics of SCIs and SRIs in a region prioritizing ethics and sustainability.
期刊介绍：
Peer Review under the responsibility of Borsa İstanbul Anonim Sirketi. Borsa İstanbul Review provides a scholarly platform for empirical financial studies including but not limited to financial markets and institutions, financial economics, investor behavior, financial centers and market structures, corporate finance, recent economic and financial trends. Micro and macro data applications and comparative studies are welcome. Country coverage includes advanced, emerging and developing economies. In particular, we would like to publish empirical papers with significant policy implications and encourage submissions in the following areas: Research Topics: • Investments and Portfolio Management • Behavioral Finance • Financial Markets and Institutions • Market Microstructure • Islamic Finance • Financial Risk Management • Valuation • Capital Markets Governance • Financial Regulations
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