This paper addresses the puzzle of why the inclusion of non-financial social justice or religious criteria by professional fund managers has been so popular in Malaysia and yet has had to date relatively little influence in the United States stock market. Drawing from over 125 ethnographic interviews with financial workers in Malaysia, this paper argues that moral investment behavior in stock markets is shaped primarily by ‘market structure’ rather than by ‘mandates.’ In both countries mandates are a weak form of social control of fund manager’s behavior. This is because mandates are not principal-agent contracts but are primarily marketing exercises and cultural tools. Social investing in the United States is weak because it relies solely on mandates to communicate clients’ ethical desires to their fund managers. Islamic and Ethical finance in Malaysia is strong because Islamic social movements have reformed the Malaysian stock market’s structure. Specifically, a uniform interpretation of Islamic investing was institutionalized with the creation of a nearly-unique quasi-governmental body. As a consequence, Islamic principles systematically influence the behavior of corporations listed in Malaysia, at present narrowly, but with the potential for wider influence in future. The paper closes with implications for social investment in the United States.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
9477.
Find related papers by JEL classification: G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East Z10 - Other Special Topics - - Cultural Economics - - - General G20 - Financial Economics - - Financial Institutions and Services - - - General A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies
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