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Does It Pay to Invest in Japanese Women? Evidence from the MSCI Japan Empowering Women Index

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Abstract

In Japan, income, authority, and prestige are unequally distributed between men and women, even if they share the same occupational level. These inequalities are perceived as an ethical issue because they go against the principle of equal treatment at work. Nowadays, Japanese companies are under growing political and regulatory pressure to increase the hiring, promotion, and empowerment of female employees. In this context, the first equity index that tracks the financial performance of the best Japanese companies in terms of gender diversity performance—the MSCI Japan Empowering Women Index (hereafter WIN)—was launched in 2010. It aims to satisfy the growing demand of investors who want to reduce gender discrimination in Japanese workplaces. This paper compares the financial performance of the WIN stock index to the conventional parent index over the period 2010–2018, offering a unique setting to assess the effects of gender diversity screens on portfolio risk-adjusted performance. Our results are robust to a battery of risk-adjusted performance indicators and clearly indicate that investing in the WIN equity index does not come at a cost compared to investing in its conventional peer. This evidence is expected to reinforce confidence of investors who have an appetite for justice in increasing their investment in financial products that support the participation and the advancement of women in the Japanese workforce.

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Notes

  1. This regulatory policy coincides with the United Nations sustainable development goal 5.5 according to which it is necessary to: “Ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic and public life” and the goal 5.C according to which it is necessary to: “Adopt and strengthen sound policies and enforceable legislation for the promotion of gender equality and the empowerment of all women and girls at all levels.” (https://www.un.org/sustainabledevelopment/gender-equality/).

  2. Full details of the MSCI Japan Empowering Women Index (Win) Methodology can be accessed at https://www.msci.com/eqb/methodology/meth_docs/MSCI_Japan_Empowering_Women_Index_Methodology_Sep2017.pdf.

  3. http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/index.html.

  4. These metrics are currently used to assess the financial performance of ethical indices and funds (see, e.g., Derwall et al. 2005; Statman 2006; Bauer et al. 2007; Kempf and Osthoff 2007; Jones et al. 2008; Renneboog et al. 2008; Gil-Bazo et al. 2010; Climent and Soriano 2011; Humphrey and Lee 2011; Chapple and Humphrey 2014; Peillex and Ureche-Rangau 2013; Belghitar et al. 2014; Ashraf 2016; Nainggolan et al. 2016; Trinks and Scholtens 2017; Xiao et al. 2017; Desbrières et al. 2018).

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Peillex, J., Boubaker, S. & Comyns, B. Does It Pay to Invest in Japanese Women? Evidence from the MSCI Japan Empowering Women Index. J Bus Ethics 170, 595–613 (2021). https://doi.org/10.1007/s10551-019-04373-8

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