Performance of Social Pillar-Based Portfolio in Developing Capital Market

Authors

DOI:

https://doi.org/10.7595/management.fon.2022.0015

Keywords:

socially responsible investing, social performance disclosure index, social pillar, portfolio diversification, emerging markets, data mining, clustering

Abstract

Research Question: This study examined the preconditions and efficiency of socially responsible investing (SRI) in the developing capital market, specifically the Belgrade Stock Exchange (BSE). Motivation: Considering the increasing trend of SRI (GSIA, 2020) and importance of information on corporate social responsibility (CSR) to investors (Miralles‐Quiros, Miralles‐Quiros, & Arraiano, 2017), especially on social issues (Giese, Nagy, & Lee, 2021), we explored the influence of applying the social criteria in asset selection on investment portfolio performance at the BSE. This study builds on the existing literature that is mostly focused on developed capital markets of Europe, the United States and Canada (Von Wallis & Klein, 2015) by analysing the issue of SRI in the developing market. The provided setup for socially driven portfolio structuring based on market trends and social performance disclosure proved to be efficient in the long-term. Idea: The core idea of this paper was to analyse the terms for SRI and empirically evaluate the performance of social pillar-based portfolio on the BSE in order to provide evidence to support the trend of SRI in developing markets. The structure of the portfolios was set using the best-in-class strategy, while the classes were determined on the basis of the stocks’ return trends. Data: The analysis was conducted using trading data and information from financial and non-financial reports of the companies listed on the BSE. Tools: Cluster analysis was used for classification of stocks, while performances of portfolios were evaluated implementing return, volatility and risk-adjusted measures. Findings: The social pillar-based portfolio outperformed the conventional one and benchmarking indices in the observed five-year period. However, mixed results were obtained in the short-term indicating that specific effects of CSR practice on financial performance of the companies in observed developing market could still be obscured. Contribution: This paper expands the existing research related to SRI in the developing markets and offers practical recommendations for potential socially conscious investors.

Author Biographies

Jovica Stanković, University of Niš, Faculty of Economics, Serbia

Jovica Stanković is an Assistant Professor at the University of Niš, Faculty of Economics, Serbia. He graduated and received his MSc degree from the Faculty of Electronics at the University of Niš, in the field of Computer Science and Informatics. He received his PhD degree from the Faculty of Economics at the University of Niš, where he teaches courses at the undergraduate and graduate levels in the field of Business Informatics. His fields of interest include information technology, information systems, data bases and data science.

Ksenija Denčić-Mihajlov, University of Niš, Faculty of Economics, Serbia

Ksenija Denčić-Mihajlov is a Full Professor at the University of Niš, Faculty of Economics, Serbia, where she teaches courses at the undergraduate and graduate levels in the field of Corporate finance and Business restructuring. She is a member of the Center of scientific, interdisciplinary risk and sustainability management (ZWIRN) at the Ostfalia University, Germany, a founding member of the Eastern European Risk Insurance Association (EERIA) and the Associated Editor of the South-Eastern Europe Journal of Economics. Her key areas of scientific research interest include: sustainable finance and ESG investing, sustainability reporting, corporate financing and restructuring.

 

Jelena Z. Stanković, University of Niš, Faculty of Economics, Serbia

Jelena Z. Stanković is an Assistant Professor at the University of Niš, Faculty of Economics, for the narrow scientific field Accounting, auditing and financial management (teaching courses: Corporate Finance and Risk Management and Insurance at the undergraduate level of studies, and Strategic Financial Management, Financial Strategy of Corporate Enterprises and Sustainability Risk Management in Finance and Insurance at the postgraduate level of studies). Her research interests include sustainable investing, corporate financing and risk management in finance and insurance.

Evica Petrović, University of Niš, Faculty of Economics, Serbia

Evica Petrović is a Full Professor at the University of Niš, Faculty of Economics, Serbia, where she teaches courses at the undergraduate and graduate levels in the field of Corporate Finance and Risk Management and Insurance. She currently holds a position of vice-rector of the University of Niš. Her key areas of scientific research interest include: insurance, sustainability risk management, corporate financing and investing.

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Published

2023-05-08

How to Cite

Stanković, J., Denčić-Mihajlov, K., Stanković, J. Z., & Petrović, E. (2023). Performance of Social Pillar-Based Portfolio in Developing Capital Market. Management:Journal of Sustainable Business and Management Solutions in Emerging Economies, 28(1), 31–42. https://doi.org/10.7595/management.fon.2022.0015

Issue

Vol. 28 No. 1 (2023)

Section

Articles

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