Socially responsible investment and financial performance of JSE listed companies in South Africa
Date
2016
Authors
Govender, Tamara
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Abstract
ABSTRACT
This research report is on socially responsible investment (SRI) and financial
performance of JSE listed companies in South Africa.
The research methodology entails a quantitative study, obtaining secondary
data on SRI compliance and financial metrics of JSE SRI constituents listed
from 2012 – 2014. The final sample size was 62 companies across nine
industrial sectors. The research instrument was a specially developed 30 point
SRI scorecard encompassing the environmental, social, governance and
climate categories based on the criteria of the SRI Index. Reviewing annual
and or sustainability development reports from the public domain, each
company was then rated on a three point rating scale for evidence of
compliance to the scorecard. Financial data for JSE companies and JSE
indices included price to earnings, price to book value and closing share prices
were obtained from the INET BFA database.
It was found that there is a negative correlation with the mean SRI score and
the overall annual share price return and price to book value whilst there is a
positive correlation with price to earnings ratio. Furthermore there was no
significant improvement in the SRI scores from 2012 to 2014 and only the
governance and related sustainability concerns category showed a significant
change which was positive.
In terms of the propositions, the finding is that JSE listed companies with high
SRI scores achieved higher than average return over two years in only the
health care and industrials sectors. Secondly JSE listed companies with low
SRI scores achieved lower than average return over two years in only the
consumer services and financials sectors. Lastly JSE listed companies with
high SRI scores achieved higher company valuation than companies with low
company valuation in the consumer goods and industrials sectors out of nine
industrial sectors. Thus the results are inconsistent in both propositions.
The findings from this research demonstrate that there is inconsistent financial
performance when investing in SRI companies listed on the JSE Index and is
thus consistent with the related literature.
Description
MBA Thesis
Keywords
Johannesburg Stock Exchange, Investments -- Social aspects, Social responsibility of business, Stocks -- Prices -- South Africa.