The agency cost of investing in ethical funds: A style analysis approach

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Date

2022-01-01

Author

Ayaydın Hacıömeroğlu, Hande
Danışoğlu, Seza
Güner, Zehra Nuray
Cem Şahin, Baki

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This study aims to determine whether ethical funds make portfolio choices in line with their investment mandates. Our results show that during the first half of the sample period, it is much more difficult to distinguish the investment styles of ethical and conventional funds. The potential for ethical fund investors to face agency conflicts from investing in portfolios that are not necessarily in line with their preferences based on environmental, social, and governance (ESG) criteria is higher in the earlier years. In the second half of the sample period, ethical funds appear to invest more in large stocks that have higher ESG ratings than their conventional counterparts. Even though both fund classes have decreased their allocation to ESG-based investment alternatives in recent years, they seem to have slightly more distinct investment styles.

Subject Keywords

Agency cost, Blended-value investing, Democratic orthogonalization, Ethical funds, Style analysis

URI

https://www.scopus.com/inward/record.uri?partnerID=HzOxMe3b&scp=85144974456&origin=inward
https://hdl.handle.net/11511/101466

Journal

Borsa Istanbul Review

DOI

https://doi.org/10.1016/j.bir.2022.11.007

Collections

Department of Business Administration, Article

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Citation Formats

H. Ayaydın Hacıömeroğlu, S. Danışoğlu, Z. N. Güner, and B. Cem Şahin, “The agency cost of investing in ethical funds: A style analysis approach,” Borsa Istanbul Review, pp. 0–0, 2022, Accessed: 00, 2023. [Online]. Available: https://www.scopus.com/inward/record.uri?partnerID=HzOxMe3b&scp=85144974456&origin=inward.