Browsing by Issue Date

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Showing results 1 to 20 of 1292
  • item.jpg
  • Journal Article


  • Authors: Ismail Abdel Mohsin, Magda (2020)

  • Current statistical data shows that almost all Muslim countries are facing economic and social problems such as the spread of poverty, mounting outstanding external debt due to compound interest and widespread unethical behaviour. Some contemporary scholars relate these problems to the oppression and the crippling policies of former colonial administrations, while others point to the governmental incompetence and corruption that triggered the last Arab spring. However, this paper contends that although the above mentioned issues may have served as catalysts that led to the worsening of socio-economic situation in many countries, the main reason for the overwhelming problems plaguing M...

  • item.jpg
  • Journal Article


  • Authors: Mohamed, Ismail Mohd; Mohd Rafede; Muneeza, Aishath (2020)

  • Ju'alah is one of the least researched types of Shariah contracts used in Islamic finance. The objective of this paper is to explore the current and potential applications of Ju'alah with specific reference to Malaysian Islamic banking, takaful and the Islamic capital market. This paper establishes that there is potential for using Ju'alah in Islamic finance as a primary and/or secondary contract. It also establishes that Ju'alah can be used in takaful, though it is not being currently used for this in Islamic banking and the Islamic capital market in Malaysia. It is anticipated that the findings of this paper will improve understanding of the practice of Ju'alah in the Malaysian Isla...

  • bank_risk_financial_development_evidence_form_dual_banking_countries_baharom et al.pdf.jpg
  • Journal Article


  • Authors: Abdul Hamid, Baharom; Naeem Azmi, Choudhari Wajahat; Ali, Mohsin (2020)

  • This study examines the impact of financial development on bank risk-taking, measured as bank capitalization and bank income diversification. We observe the relationship using annual bank-level data from countries with dual-banking systems. The dataset spans from 2000 to 2014. Our results suggest that the impact of financial development on bank capitalization is heterogeneous across Islamic and conventional commercial banks. Moreover, the effect is different across listed and unlisted banks. However, on average, the response of income diversification to financial development is similar across most specifications. Additionally, bank risk is found to be countercyclical, suggesting that ...

  • damage_assessment_Kelantan_flooding_baharom et al.pdf.jpg
  • Journal Article


  • Authors: Padli, Jaharudin; Md. Shah, Kamarul; Musa, Haslina; Jasmi, Abu Talib; Ahmad, Jusuh; Habibullah, Muzafar Shah; Abdul Hamid, Baharom (2020)

  • This study will focus on assessing the total amount of damage and losses that has occurred during the 2014 flood disaster in Kelantan. The phenomenon of heavy rainfall during monsoon season is normal in Malaysia especially for the east coastal state areas between November to March every year. With the rainfall rate of 794mm which is 1.6 times higher than the average rainfall from the previous year, it has destroyed dwelling houses, animals, crops and also agricultural land. By using cross-sectional data analysis with Ordinary Least Square (OLS) method on 686 respondents in Kuala Krai, Kelantan, the results showed that early warning indicators such as Short Message Services (SMS) and o...

  • house_financing_contracts_used_Islamic_banks_finished_properties_Malaysia_aishath et al.pdf.jpg
  • Journal Article


  • Authors: Muneeza, Aishath; Fauzi, Muhammad Fahmi; Mat Nor, Muhammad Faisal; Abideen, Mohamed; Ajroudi, Muhammed Maher (2020)

  • The purpose of this paper is to find out the existing practices of the Islamic banks in providing financing to the customers who have a requirement to purchase a finished property and to examine the existing products used by the Islamic banks in this regard by providing an insight into the modus operandi of these products. In doing this, attempt is made to find out the most famous product offered by the Islamic banks in this regard and to find out whether in reality, Malaysian Islamic banking industry has moved away from Bai Bithaman Ajil (BBA) or not. This is a qualitative research, largely library-based, and it will consist of secondary sources such as books, journals, articles and ...

  • comment_on_protectionism_under Trump_ariff.pdf.jpg
  • Journal Article


  • Authors: Abdul Kareem, Mohamed Ariff (2020)

  • The USA under Trump has departed from its long-cherished tradition of being a leading proponent of liberal trade policies to a new norm that seeks comfort in protection-ism. Noland (2020) provides a deep insight into the political economy that explains the sudden reversal of US trade policies since 2016. In addition to furnishing an excel-lent literature survey which sheds considerable light on the issues at hand, Noland delves into an econometric analysis of the voter preferences, in which the explanatory variables are economic, demographic and cultural factors, with interaction terms.

  • short-term_Shariah-compliant_Islamic_liquidity_management_instruments_sustain_Islamic_banking_aishath.pdf.jpg
  • Journal Article


  • Authors: Muneeza, Aishath (2020)

  • The purpose of this paper is to describe the structure of the Islamic treasury bills issued by the Central Bank of Maldives, Maldives Monetary Authority (MMA) for the benefit of those jurisdictions that aspire to introduce short term Islamic liquidity management instruments. This is exploratory research where the experience of the author in structuring the Islamic liquidity management instruments discussed in the paper. It is evident from the discussions of this paper that innovation is the key to structure Shari'ah compliant short term liquidity management instruments. The example of Maldives has proved that there is a need to amend the laws of the country to facilitate Central banks...

  • a_statistical_model_of_the_firm_Belal.pdf.jpg
  • Journal Article


  • Authors: Baaquie, Belal E. (2019)

  • A model of the firm is proposed that considers the firm to be a stochastic and random entity described by an action functional and the Feynman path integral. The action functional is postulated based on the profit maximization principle. The Cobb-Douglas production function and the Solow-Swan model for capital input are employed to define a specific model for the firm's action functional. An option is defined on the profit of a firm in the framework of the statistical model. The option's price can be studied empirically. A profit and loss sharing system of wages is defined as an extension of fixed wages.

  • the_maldives’s_vision_to_be_an_islamic_aishath.pdf.jpg
  • Industry Article


  • Authors: Muneeza, Aishath (2019)

  • Outstanding employees for 2018 were honored during the Capital Market Development Authority (CMDA)'s 13th anniversary event held on the 10th February 2019 at Champa Central Hotel, Male. The chief guest of the ceremony, Minister of Finance and Treasury Ibrahim Ameer, emphasized in his speech the vision of the government to sustain Islamic finance in the country and to strategize the Maldives as a hub of Islamic finance.

  • maldives_islamic_bank_to_go_aishath.pdf.jpg
  • Industry Article


  • Authors: Muneeza, Aishath (2019)

  • The Maldives Islamic Bank (MIB) plans to go for an IPO this year. The current shareholdings in MIB are 70% by the Islamic Corporation for the Development of the Private Sector, 25% by the government of the Maldives and 5% by Amana Takaful Maldives, the only Islamic equity listed on the Maldives Stock Exchange since 2011.

  • amana_takaful_maldives_aishath.pdf.jpg
  • Industry Article


  • Authors: Muneeza, Aishath (2019)

  • Amana Takaful Maldives (Amana Takaful) held its eighth annual general meeting (AGM) on the 28th April 2019 in the Republic of Maldives. During the meeting, the minutes of the 2018 AGM were adopted and the annual report of the board of directors on the affairs of the company for the year ended the 31st December 2018 and the report of the auditors were passed, among other things.

  • item.jpg
  • Journal Article


  • Authors: Baaquie, Belal E.; Richmond, Peter; Roehner, Bertrand M.; Qing-hai, Wang (2019)

  • In earlier centuries kings and governments employed astrologists to help them take the best decisions. Present-day governments no longer employ astrologists but still have no clear analytical tool to replace them. Over the past two decades we have developed a methodology for the scientific investigation of recurrent historical events. It consists in two steps. (i) Identification and comparison of historical episodes driven by a common mechanism. (ii) Under the reasonable assumption that what has happened several times in the past is likely to happen again, one then derives testable predictions. This of course is nothing other than the protocol used in experimental science when explori...

  • item.jpg
  • Master


  • Authors: Mohd Affendi, Nur Diyana Najwa (2019)

  • The sharing economy is a new uprising economic system that is built upon the sharing of assets via digital platforms to create economic value through maximizing utilisation of resources between individuals, businesses and government. Perceived as a strong advocate for sustainability, the sharing economy has contributed to a profound shift in global consumer consumption behaviour. Positive to its potential to be utilised as driver for sustainable development, this paper aims to uncover the role of sharing economy towards sustainable development of Malaysia. The study employed three qualitative research methods, namely phenomenography, semi-structured interview and content analysis. The...

  • item.jpg
  • Master


  • Authors: Guedira, Souhaila (2019)

  • This study is an initial attempt investigating the extent to which portfolio diversification benefits are available at different investment horizons to Turkish conventional and Shari'ah compliant investors in Southeast Asian conventional and Islamic stock markets. We apply multivariate-generalized autoregressive conditional heteroscedastic (MGARCH-DCC) and Wavelet techniques on daily data spanning from 2007 to 2018. The findings tend to suggest that Turkish investors would likely not invest in Singapore stock markets. At the same time, investing in stock indices of Indonesia and Thailand present moderate diversification benefits overall. The results highly recommend that Turkish conve...

  • item.jpg
  • PhD


  • Authors: Khan, Shabeer (2019)

  • Although literature on shadow economy has been growing, the examination is scarce in the case of developing countries, especially the Organization of Islamic Cooperation (OIC) economies. In this study, we develop various testable hypotheses related to shadow economy. We investigate the determinants of shadow economy across a large sample of 141 countries and examine whether it varies across OIC (42) and non-OIC (99) countries. The average size of the shadow economy in OIC countries is 34.36% of gross domestic product (GDP) while it is 30.57% of GDP in non-OlC economies. The approach of exploring various definitions, historical development, types, Islamic viewpoint and the determining ...

  • the_impact_social_enviromental_sustainability_financial_performance_adam.pdf.jpg
  • Journal Article


  • Authors: Nizam, Esma; Ng, Adam Boon Ka; Dewandaru, Ginanjar; Nagayev, Ruslan; Nkoba, Malik Abdulrahman (2019)

  • Despite the promising evidence of the corporate social and environmental performance-corporate financial performance relations across various business sectors, the findings from banking sector remain limited and inconclusive. This article examines the impact of access to finance and environmental financing on the financial performance of the banking sector globally. Based on cross-sectional linear regression and non-linear threshold regression of 713 banks from 75 countries over the period of 2013-2015, we find that access to finance has significantly positive effects on banks' financial performance in most of the estimation models controlling for both bank specific and macroeconomic ...

  • too_small_succeed_versus_too_big_fail_marjan_obiya_mansur.pdf.jpg
  • Journal Article


  • Authors: Naseri, Marjan; Bacha, Obiyathulla Ismath; Mohammed Masih, Abul Mansur (2019)

  • Even though large banks could imply large risks and heightened vulnerability for a country's macroeconomy, the presence of many small banks with similar behavior such as Islamic banks could also cause systemic risks. This article makes an initial attempt to investigate the impact of bank size on banking performance. Our study spans 12 emerging countries with dual banking systems and applies two-step dynamic system GMM estimator. The results show that size really does matter in the banking industry, and its impact on performance tends to be non-linear with a trade-off between profitability and efficiency. Comparing conventional with Islamic banks, we find that bank size has almost the ...

  • ethical_investments_financial_performance_shamsher_eskandar.pdf.jpg
  • Journal Article


  • Authors: Naeem Azmi, Choudhari Wajahat; Ramadili Mohd, Shamsher Mohamad; Mohd Rasid, Mohamed Eskandar Shah (2019)

  • This paper examines the financial performance of ethical funds in different regions and concludes that there is a cost attached to ethical investing. An analysis of 964 mutual funds comprising of Socially responsible funds (SRFs) and the Shariah-compliant equity funds (SCFs) suggests that: a) except for global funds, both types of funds underperform in the market, b) both types of funds are preferred for investment in growth and momentum stocks, c) SRFs are preferred for small capitalized stocks whereas SCFs do not follow any specific style or investment strategy, d) unlike SRFs, SCFs do not provide a safe haven for investors during crises. These findings are probably due to the lack ...

  • the_substitution_hypothesis_agency_conflicts_shamsher_eskandar.pdf.jpg
  • Journal Article


  • Authors: Naeem Azmi, Choudhari Wajahat; Anwer, Zaher; Ramadili Mohd, Shamsher Mohamad; Mohd Rasid, Mohamed Eskandar Shah (2019)

  • According to the substitution hypothesis and recent evidence, firms that are better governed carry less debt and experience fewer agency problems. This may also imply that firms with lower debt are better governed and experience lower agency costs. We test this hypothesis by comparing the agency costs of Shariah compliant (SC, and therefore low debt) and Shariah noncompliant (SNC) firms, using a proprietary dataset comprising constituents of the Dow Jones Islamic index for the period 2006-2015. The findings support the hypothesis but are contingent on the firm's idiosyncratic risk; SC firms with low idiosyncratic risk have higher agency costs.

Browsing by Issue Date

Jump to a point in the index:
Showing results 1 to 20 of 1292
  • item.jpg
  • Journal Article


  • Authors: Ismail Abdel Mohsin, Magda (2020)

  • Current statistical data shows that almost all Muslim countries are facing economic and social problems such as the spread of poverty, mounting outstanding external debt due to compound interest and widespread unethical behaviour. Some contemporary scholars relate these problems to the oppression and the crippling policies of former colonial administrations, while others point to the governmental incompetence and corruption that triggered the last Arab spring. However, this paper contends that although the above mentioned issues may have served as catalysts that led to the worsening of socio-economic situation in many countries, the main reason for the overwhelming problems plaguing M...

  • item.jpg
  • Journal Article


  • Authors: Mohamed, Ismail Mohd; Mohd Rafede; Muneeza, Aishath (2020)

  • Ju'alah is one of the least researched types of Shariah contracts used in Islamic finance. The objective of this paper is to explore the current and potential applications of Ju'alah with specific reference to Malaysian Islamic banking, takaful and the Islamic capital market. This paper establishes that there is potential for using Ju'alah in Islamic finance as a primary and/or secondary contract. It also establishes that Ju'alah can be used in takaful, though it is not being currently used for this in Islamic banking and the Islamic capital market in Malaysia. It is anticipated that the findings of this paper will improve understanding of the practice of Ju'alah in the Malaysian Isla...

  • bank_risk_financial_development_evidence_form_dual_banking_countries_baharom et al.pdf.jpg
  • Journal Article


  • Authors: Abdul Hamid, Baharom; Naeem Azmi, Choudhari Wajahat; Ali, Mohsin (2020)

  • This study examines the impact of financial development on bank risk-taking, measured as bank capitalization and bank income diversification. We observe the relationship using annual bank-level data from countries with dual-banking systems. The dataset spans from 2000 to 2014. Our results suggest that the impact of financial development on bank capitalization is heterogeneous across Islamic and conventional commercial banks. Moreover, the effect is different across listed and unlisted banks. However, on average, the response of income diversification to financial development is similar across most specifications. Additionally, bank risk is found to be countercyclical, suggesting that ...

  • damage_assessment_Kelantan_flooding_baharom et al.pdf.jpg
  • Journal Article


  • Authors: Padli, Jaharudin; Md. Shah, Kamarul; Musa, Haslina; Jasmi, Abu Talib; Ahmad, Jusuh; Habibullah, Muzafar Shah; Abdul Hamid, Baharom (2020)

  • This study will focus on assessing the total amount of damage and losses that has occurred during the 2014 flood disaster in Kelantan. The phenomenon of heavy rainfall during monsoon season is normal in Malaysia especially for the east coastal state areas between November to March every year. With the rainfall rate of 794mm which is 1.6 times higher than the average rainfall from the previous year, it has destroyed dwelling houses, animals, crops and also agricultural land. By using cross-sectional data analysis with Ordinary Least Square (OLS) method on 686 respondents in Kuala Krai, Kelantan, the results showed that early warning indicators such as Short Message Services (SMS) and o...

  • house_financing_contracts_used_Islamic_banks_finished_properties_Malaysia_aishath et al.pdf.jpg
  • Journal Article


  • Authors: Muneeza, Aishath; Fauzi, Muhammad Fahmi; Mat Nor, Muhammad Faisal; Abideen, Mohamed; Ajroudi, Muhammed Maher (2020)

  • The purpose of this paper is to find out the existing practices of the Islamic banks in providing financing to the customers who have a requirement to purchase a finished property and to examine the existing products used by the Islamic banks in this regard by providing an insight into the modus operandi of these products. In doing this, attempt is made to find out the most famous product offered by the Islamic banks in this regard and to find out whether in reality, Malaysian Islamic banking industry has moved away from Bai Bithaman Ajil (BBA) or not. This is a qualitative research, largely library-based, and it will consist of secondary sources such as books, journals, articles and ...

  • comment_on_protectionism_under Trump_ariff.pdf.jpg
  • Journal Article


  • Authors: Abdul Kareem, Mohamed Ariff (2020)

  • The USA under Trump has departed from its long-cherished tradition of being a leading proponent of liberal trade policies to a new norm that seeks comfort in protection-ism. Noland (2020) provides a deep insight into the political economy that explains the sudden reversal of US trade policies since 2016. In addition to furnishing an excel-lent literature survey which sheds considerable light on the issues at hand, Noland delves into an econometric analysis of the voter preferences, in which the explanatory variables are economic, demographic and cultural factors, with interaction terms.

  • short-term_Shariah-compliant_Islamic_liquidity_management_instruments_sustain_Islamic_banking_aishath.pdf.jpg
  • Journal Article


  • Authors: Muneeza, Aishath (2020)

  • The purpose of this paper is to describe the structure of the Islamic treasury bills issued by the Central Bank of Maldives, Maldives Monetary Authority (MMA) for the benefit of those jurisdictions that aspire to introduce short term Islamic liquidity management instruments. This is exploratory research where the experience of the author in structuring the Islamic liquidity management instruments discussed in the paper. It is evident from the discussions of this paper that innovation is the key to structure Shari'ah compliant short term liquidity management instruments. The example of Maldives has proved that there is a need to amend the laws of the country to facilitate Central banks...

  • a_statistical_model_of_the_firm_Belal.pdf.jpg
  • Journal Article


  • Authors: Baaquie, Belal E. (2019)

  • A model of the firm is proposed that considers the firm to be a stochastic and random entity described by an action functional and the Feynman path integral. The action functional is postulated based on the profit maximization principle. The Cobb-Douglas production function and the Solow-Swan model for capital input are employed to define a specific model for the firm's action functional. An option is defined on the profit of a firm in the framework of the statistical model. The option's price can be studied empirically. A profit and loss sharing system of wages is defined as an extension of fixed wages.

  • the_maldives’s_vision_to_be_an_islamic_aishath.pdf.jpg
  • Industry Article


  • Authors: Muneeza, Aishath (2019)

  • Outstanding employees for 2018 were honored during the Capital Market Development Authority (CMDA)'s 13th anniversary event held on the 10th February 2019 at Champa Central Hotel, Male. The chief guest of the ceremony, Minister of Finance and Treasury Ibrahim Ameer, emphasized in his speech the vision of the government to sustain Islamic finance in the country and to strategize the Maldives as a hub of Islamic finance.

  • maldives_islamic_bank_to_go_aishath.pdf.jpg
  • Industry Article


  • Authors: Muneeza, Aishath (2019)

  • The Maldives Islamic Bank (MIB) plans to go for an IPO this year. The current shareholdings in MIB are 70% by the Islamic Corporation for the Development of the Private Sector, 25% by the government of the Maldives and 5% by Amana Takaful Maldives, the only Islamic equity listed on the Maldives Stock Exchange since 2011.

  • amana_takaful_maldives_aishath.pdf.jpg
  • Industry Article


  • Authors: Muneeza, Aishath (2019)

  • Amana Takaful Maldives (Amana Takaful) held its eighth annual general meeting (AGM) on the 28th April 2019 in the Republic of Maldives. During the meeting, the minutes of the 2018 AGM were adopted and the annual report of the board of directors on the affairs of the company for the year ended the 31st December 2018 and the report of the auditors were passed, among other things.

  • item.jpg
  • Journal Article


  • Authors: Baaquie, Belal E.; Richmond, Peter; Roehner, Bertrand M.; Qing-hai, Wang (2019)

  • In earlier centuries kings and governments employed astrologists to help them take the best decisions. Present-day governments no longer employ astrologists but still have no clear analytical tool to replace them. Over the past two decades we have developed a methodology for the scientific investigation of recurrent historical events. It consists in two steps. (i) Identification and comparison of historical episodes driven by a common mechanism. (ii) Under the reasonable assumption that what has happened several times in the past is likely to happen again, one then derives testable predictions. This of course is nothing other than the protocol used in experimental science when explori...

  • item.jpg
  • Master


  • Authors: Mohd Affendi, Nur Diyana Najwa (2019)

  • The sharing economy is a new uprising economic system that is built upon the sharing of assets via digital platforms to create economic value through maximizing utilisation of resources between individuals, businesses and government. Perceived as a strong advocate for sustainability, the sharing economy has contributed to a profound shift in global consumer consumption behaviour. Positive to its potential to be utilised as driver for sustainable development, this paper aims to uncover the role of sharing economy towards sustainable development of Malaysia. The study employed three qualitative research methods, namely phenomenography, semi-structured interview and content analysis. The...

  • item.jpg
  • Master


  • Authors: Guedira, Souhaila (2019)

  • This study is an initial attempt investigating the extent to which portfolio diversification benefits are available at different investment horizons to Turkish conventional and Shari'ah compliant investors in Southeast Asian conventional and Islamic stock markets. We apply multivariate-generalized autoregressive conditional heteroscedastic (MGARCH-DCC) and Wavelet techniques on daily data spanning from 2007 to 2018. The findings tend to suggest that Turkish investors would likely not invest in Singapore stock markets. At the same time, investing in stock indices of Indonesia and Thailand present moderate diversification benefits overall. The results highly recommend that Turkish conve...

  • item.jpg
  • PhD


  • Authors: Khan, Shabeer (2019)

  • Although literature on shadow economy has been growing, the examination is scarce in the case of developing countries, especially the Organization of Islamic Cooperation (OIC) economies. In this study, we develop various testable hypotheses related to shadow economy. We investigate the determinants of shadow economy across a large sample of 141 countries and examine whether it varies across OIC (42) and non-OIC (99) countries. The average size of the shadow economy in OIC countries is 34.36% of gross domestic product (GDP) while it is 30.57% of GDP in non-OlC economies. The approach of exploring various definitions, historical development, types, Islamic viewpoint and the determining ...

  • the_impact_social_enviromental_sustainability_financial_performance_adam.pdf.jpg
  • Journal Article


  • Authors: Nizam, Esma; Ng, Adam Boon Ka; Dewandaru, Ginanjar; Nagayev, Ruslan; Nkoba, Malik Abdulrahman (2019)

  • Despite the promising evidence of the corporate social and environmental performance-corporate financial performance relations across various business sectors, the findings from banking sector remain limited and inconclusive. This article examines the impact of access to finance and environmental financing on the financial performance of the banking sector globally. Based on cross-sectional linear regression and non-linear threshold regression of 713 banks from 75 countries over the period of 2013-2015, we find that access to finance has significantly positive effects on banks' financial performance in most of the estimation models controlling for both bank specific and macroeconomic ...

  • too_small_succeed_versus_too_big_fail_marjan_obiya_mansur.pdf.jpg
  • Journal Article


  • Authors: Naseri, Marjan; Bacha, Obiyathulla Ismath; Mohammed Masih, Abul Mansur (2019)

  • Even though large banks could imply large risks and heightened vulnerability for a country's macroeconomy, the presence of many small banks with similar behavior such as Islamic banks could also cause systemic risks. This article makes an initial attempt to investigate the impact of bank size on banking performance. Our study spans 12 emerging countries with dual banking systems and applies two-step dynamic system GMM estimator. The results show that size really does matter in the banking industry, and its impact on performance tends to be non-linear with a trade-off between profitability and efficiency. Comparing conventional with Islamic banks, we find that bank size has almost the ...

  • ethical_investments_financial_performance_shamsher_eskandar.pdf.jpg
  • Journal Article


  • Authors: Naeem Azmi, Choudhari Wajahat; Ramadili Mohd, Shamsher Mohamad; Mohd Rasid, Mohamed Eskandar Shah (2019)

  • This paper examines the financial performance of ethical funds in different regions and concludes that there is a cost attached to ethical investing. An analysis of 964 mutual funds comprising of Socially responsible funds (SRFs) and the Shariah-compliant equity funds (SCFs) suggests that: a) except for global funds, both types of funds underperform in the market, b) both types of funds are preferred for investment in growth and momentum stocks, c) SRFs are preferred for small capitalized stocks whereas SCFs do not follow any specific style or investment strategy, d) unlike SRFs, SCFs do not provide a safe haven for investors during crises. These findings are probably due to the lack ...

  • the_substitution_hypothesis_agency_conflicts_shamsher_eskandar.pdf.jpg
  • Journal Article


  • Authors: Naeem Azmi, Choudhari Wajahat; Anwer, Zaher; Ramadili Mohd, Shamsher Mohamad; Mohd Rasid, Mohamed Eskandar Shah (2019)

  • According to the substitution hypothesis and recent evidence, firms that are better governed carry less debt and experience fewer agency problems. This may also imply that firms with lower debt are better governed and experience lower agency costs. We test this hypothesis by comparing the agency costs of Shariah compliant (SC, and therefore low debt) and Shariah noncompliant (SNC) firms, using a proprietary dataset comprising constituents of the Dow Jones Islamic index for the period 2006-2015. The findings support the hypothesis but are contingent on the firm's idiosyncratic risk; SC firms with low idiosyncratic risk have higher agency costs.