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Vol 40 No 3 (2025): September

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Submitted
Nov 29, 2023
Accepted
Dec 9, 2024
Published
Sep 29, 2025
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Are There Financial Sacrifices in Ethical Investing? A Comparative Study of Indonesia and Malaysia

https://doi.org/10.22146/jieb.v40i3.11007
Farah Amalia
farhasjmi@walisongo.ac.id
Department of Management, Faculty of Islamic Economics and Business, Universitas Islam Negeri Walisongo, Semarang, 50185, Indonesia
Shafinar Ismail
Department of Finance, Faculty of Business Management, Universiti Teknologi MARA, Melaka, 75350, Malaysia
Muchamad Fauzi
Department of Management, Faculty of Islamic Economics and Business, Universitas Islam Negeri Walisongo, Semarang, 50185, Indonesia
Amirudin Mohd Nor
Department of Finance, Faculty of Business Management, Universiti Teknologi MARA, Melaka, 75350, Malaysia

Corresponding Author(s) : Farah Amalia

farhasjmi@walisongo.ac.id

Journal of Indonesian Economy and Business, Vol 40 No 3 (2025): September

Abstract

Introduction/Main Objectives: Ethical investment in Southeast Asia is gaining traction, particularly in countries like Indonesia and Malaysia. This research aims to measure the performance of ethical investments and compare them with their opposite category, sin stocks. Investors should avoid sin stocks because they operate in controversial areas and go against ethical investment principles. Background Problems: Previous research conducted in developed countries shows that ethical investments are inferior to sin stocks, thus investors suffer financial sacrifices. Novelty: A comprehensive ethical investment instrument that involves sustainability and religion-based investments. Formation of sin stock portfolios in two Muslim countries. Research Methods: A volatility analysis and a descriptive analysis were carried out to provide a comprehensive picture of the performance of ethical and sin stocks. The analysis continues by comparing and explaining why and how the results occurred. Finding/Results: Ethical stock returns underperformed sin stocks in Malaysia, and ethical stocks outperformed sin stocks in Indonesia. This exciting result can be explained by the differences in screening criteria, perceptions, and regulations in these two neighboring countries. Conclusion: There are no financial sacrifices in ethical investing in Indonesia, so ethical investors do not need to hesitate. They are advised to invest ethically because they achieve two goals at once. Meanwhile, Malaysian ethical investors must be prudent and careful in investing to continue achieving social goals and mitigating losses.

Keywords

Ethical investment sin stock performance SRI stock performance Sharia stock performance financial sacrifice
Amalia, F., Ismail, S., Fauzi, M., & Mohd Nor, A. (2025). Are There Financial Sacrifices in Ethical Investing? A Comparative Study of Indonesia and Malaysia. Journal of Indonesian Economy and Business, 40(3), 382 -. https://doi.org/10.22146/jieb.v40i3.11007
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Author Biographies

Farah Amalia, Department of Management, Faculty of Islamic Economics and Business, Universitas Islam Negeri Walisongo, Semarang, 50185, Indonesia

Farah Amalia is a lecturer and researcher at the Department of Management, Universitas Islam Negeri Walisongo Semarang, Indonesia where she has been a faculty member since 2019. She earned her Bachelor’s degree in Management at the Faculty of Business and Economics, Universitas Islam Indonesia. She did her Master’s and doctoral degree in Financial Management at Diponegoro University. Her research interests lie in the areas of investment and behavioral finance.

Shafinar Ismail, Department of Finance, Faculty of Business Management, Universiti Teknologi MARA, Melaka, 75350, Malaysia

Shafinar Ismail is a Finance Professor at Universiti Teknologi MARA (UiTM), Melaka, Malaysia. She was the Deputy Rector for Research and Industrial Linkages from 2015 to 2021. She joined Universiti Teknologi MARA, Malaysia, in August 2011 and has produced excellent academic work since then. She earned her Bachelor’s degree in Science of Resource Economics and Finance at Universiti Putra Malaysia. She pursued her Master’s degree in Business Administration at the Universiti Teknologi MARA Malaysia, and later completed her Ph.D. in Finance at Universiti Brunel University, London.

Muchamad Fauzi, Department of Management, Faculty of Islamic Economics and Business, Universitas Islam Negeri Walisongo, Semarang, 50185, Indonesia

Muchamad Fauzi is a lecturer and researcher at the Department of Management, Faculty of Economics and Islamic Business, Universitas 17 Agustus 1945 Semarang, Indonesia. He earned his Bachelor’s degree in Management at Universitas Islam Negeri Walisongo Semarang. He pursued his Master’s degree in Management at Diponegoro University and later completed his Ph.D. in Management at Universitas Islam Negeri Walisongo Semarang. His research interests focus on Halal Management. His idea is to integrate operational management as one function of management with the core principe halal in Islam.

Amirudin Mohd Nor, Department of Finance, Faculty of Business Management, Universiti Teknologi MARA, Melaka, 75350, Malaysia

Amirudin Mohd Nor is a lecturer and researcher at the Department of Finance, Universiti Teknologi MARA (UiTM), Melaka, Malaysia. He holds a Master of Business Administration from Universiti Teknologi MARA (UiTM), Malaysia, a Bachelor of Science in Business Administration (Finance) from California State University, Sacramento, USA, and a Diploma in Business Studies from Institut Teknologi MARA (ITM), Melaka, Malaysia. Prior to joining UiTM, he had a decade of experience serving companies in the stockbroking and Islamic banking industries. His area of expertise and research interest relates to finance, banking, and investments, specifically on the subject of risk management, non-performing loans, credit recovery, and technical analysis. Besides research, he has a strong interest in innovation and collaborative teaching activities, trying to bridge classroom learning with real-world practice.

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