Publication:
Shariah compliance status and value of analysts' recommendation revisions: evidence from Malaysia
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Date
2021
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Abstract
This study examines the effect of 1096 analyst recommendation revisions on prices of Shariah compliant and Shariah non-compliant listed securities in Bursa Malaysia over the period 2005-2016. The study finds that while stocks added-to-buy had positive abnormal returns, the stocks added-to-sell and remove-from-buy had negative abnormal returns in short- and long-term horizons. This finding shows that analysts' recommendation revisions carry valuable information. Secondly, the study examined the effect of analysts' recommendation revisions issued contemporaneously with earnings announcements and without earnings announcements on price reactions over various time horizons. The results show that earnings announcements can trigger analysts' recommendation revisions because the investors react strongly to analysts' recommendation revisions issued contemporaneously with earnings announcements. We find that performance differences of Shariah-compliant and Shariah non-compliant stocks in response to analysts' recommendation revisions are often negligible. Overall, this study provides empirical evidence that analysts' recommendation revisions for Shariah-compliant companies often do not own any additional investment value than those for Shariah non-compliant stocks.
Keywords
Analysts , Forecasts , Revisions , Earnings , Islamic finance , Shariah-compliant stocks , Malaysia
Citation
Yas, Murat and Mohd Rasid, Mohamed Eskandar Shah. (2021). Shariah compliance status and value of analysts' recommendation revisions: evidence from Malaysia. Journal of Islamic Economics, 2, pp. 1-34.
Publisher
University of Ankara