The Impact of Socially Responsible Investing in European Markets: Evidence of the Global Financial Crisis

Abstract

The increasing global importance of the environmental, social and economic aspects and the high complexity of their implications at the corporate level is the reason for an intense and extensive research activity, leading Socially Responsible Investing to a current and prominent theme, namely in Europe. In this context, this study analyses the effects of Socially Responsible Investing on portfolio performance of all listed firms on the ten most important European stock markets over the period 2001-2013 rated by the Global Reporting Initiative. In order to measure the portfolios' performance, a market model and a four-factor model are applied in which risk factors were constructed for the markets under study. A relevant finding of the present study is that investing in this type of firms before the financial crisis was less risky than investing afterwards, as it presented to be riskier. Nevertheless, investing in socially responsible firms which had a higher profitability in the past outperforms the market. However, the results show the existence of market singularities across European countries that must be considered, as well as the periods of pre and post global financial crisis that affected the European stock markets, triggered the sovereign debt crisis, especially in peripheral countries.

The Stage of Corporate Social Responsibility in EU-CEE Countries

“…Nevertheless, this study shows that the majority of firms still not disclose according GRI guidelines. There is a significant difference between EU-CEE countries and developed European countries (Arraiano, 2018). As we expected, the results show that the evolution of reporting practices has improved over the years in each other eleven countries of this European region and the most reports are prepared by multinationals companies.…”

“…The metodology of research consists of analysis of the regulation adopted by EU-CEE countries regarding CSR using logical and comparative analysis and dynamic GRI reports analysis by countries and activity sector. The choice of GRI database has two essences, on the one hand is the most used worldwide by stakeholders and managers, and secondly by the researchers (Schadewitz and Niskala 2010, De Klerk and De Villiers 2012, Miralles, Miralles & Arraiano 2017, Arraiano 2018 who followed the GRI guidelines. Our sample comprises 275 companies considered in all sectors of activity and rated by GRI over the period 2002-2018.…”