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Introduction
Islamic Finance alternatives for financing Development infrastructure.
Current institution
Publications
Publications (154)
Following the recent global financial crisis, Islamic banks (IBs) have grown rapidly and are found to create more liquidity for the economy relative to their conventional counterparts. Nonetheless, the significance of their impact on real economic output relative to pure conventional banks (PCBs) has not been examined empirically. The aim of this s...
This paper addresses two key issues in Corporate Social Performance (CSP) research. First, it investigates the impact of CSP on Financial Stability (FS), and second, it examines the influence of different banking models on the relationship between CSP and FS. Using a cross-country sample of 117 financial institutions from 36 countries over an 8-yea...
Islamic Banking and Finance (IBF) has had forty years of impressive growth, yet, within the Muslim world, there is a paradox of huge accumulated wealth and seriously underdeveloped financial markets. This paper examines whether over its 40-year existence, IBF has lived up to its anticipated goals and objectives. It argues that growth has been patch...
Purpose
This study aims to examine the impact of liquidity creation per capita of tri-banking system and dual banking system on real economic output.
Design/methodology/approach
This study applies the feasible generalized least square framework on the data set of 12 countries, 8 with tri-banking system and 4 with dual banking system over the 2013–...
This paper examines the effects of bank financing diversification and market concentration on bank stability in Malaysia. Our study is unique as it investigates these effects within a banking industry that has undergone major restructuring due to the introduction and rapid penetration of a new banking type, Islamic banking. Despite its recent histo...
Purpose — This study aims to assess the impact of banking models on the relationship between corporate social performance (CSP) and corporate financial performance (CFP) in determining a viable model for sustainable banking. Design/Methodology/Approach — The study uses a cross-country sample of 117 financial institutions across 36 countries over an...
We examine the impact of the liquidity creation of Full-fledged Islamic Banks (FIBs) and Hybrid Conventional Banks (HCBs) on real economic output for a sample of 10 countries over the 11-year period from 2012–2022. Using the Feasible Generalized Least Squares (FGLS) framework, we show that both FIBs and HCBs liquidity creation per capita impact rea...
This study examines the extent and nature of foreign exchange exposure in 405 listed corporations operating in the ASEAN-4 nations; Indonesia, Malaysia, Singapore, and Thailand. The study period of 23 years, from 1995 to 2017, covers the two major crisis periods, the Asian financial crisis (AFC) of 1997 and the global financial crisis (GFC) of 2008...
Purpose
The purpose of this study is to understand and evaluate the roles and functions of the Sharīʿah committee (SC) of Islamic banks (IBs) in Malaysia and to recommend a resetting of the scope of responsibilities to enable the SC to effectively respond to current market needs.
Design/methodology/approach
A Likert-type survey questionnaire was d...
Islamic Finance alternative to salvaging SMEs suffering from disruptions caused by the pandemic
This paper examines the economic and financial impact of the COVID-19 pandemic and the
responses that governments undertook. Though large and unprecedented in size, policy response has
mostly been the same. Huge monetary stimulus, rate cuts, direct market intervention like bond
purchases and debt moratoriums. Many of these were techniques used in t...
Purpose
The purpose of this study is to examine the relationship of the board and risk committee in respect of risk-taking in conventional and Islamic banks in Malaysia.
Design/methodology/approach
This study uses unbalanced panel data for 15 conventional and 14 Islamic banks over the period 2007–2016. The generalised least squares random effects...
Islamic equity portfolios work with a smaller investment universe given the filtering of non-Shari’ah compliant stocks. It has been theoretically argued that this culminates in suboptimal portfolio diversification, which in turn adversely affects risk-adjusted returns. We offer empirical evidence that such a conceived portfolio diversification “pen...
Many Organization of the Islamic Cooperation (OIC) stock markets are still in their early stage of development. In this stage, several conditions such as weak legal system and regulations, a limited supply of institutional investors, lack of transparency and accountability are key hurdles. Several approaches have been taken to enhance the capacity...
The issue of liquidity and the under development of the Organization of Islamic Cooperation (OIC) stock markets have been a hindrance factor for companies in those countries to seek fund and capital. Due to this reason, many companies choose Depositary Receipts (DRs) to raise capital internationally. Thus, this study aims at examining the financial...
The issue of liquidity and underdevelopment of the Organisation of Islamic Cooperation (OIC) stock markets has caused problems to companies in those countries that seek higher equity capital. One way out of this problem is to employ international markets more intensively by seeking cheaper cost of capital through Depositary Receipts (DRs). Many stu...
In theory, the cornerstones of Islamic finance are interest avoidance and risk-sharing. In practice, however, Islamic banks seem to be lacking both, particularly the latter. We investigate the interest rate impact on Islamic banks' three most widely used types of financing instruments – i.e. sale-based, lease-based and risk-sharing – by employing t...
In theory, the cornerstones of Islamic finance are interest avoidance and risk sharing. In practice, however, Islamic banks seem to be lacking both. We investigate the interest rate impact on Islamic banks' three most-widely used types of financing instruments by employing the system GMM estimators on a unique panel data set of 77 Islamic banks fro...
One of the major current concerns of real economy is the negative impact of the debt on the stability of financial markets. This paper makes an attempt to investigate the relationship between firm’s leverage, and risk-return profile viewed from an Islamic finance perspective based on the Mean-Variance Efficient Frontier (MVEF) concept. The latter i...
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 coun...
This chapter examines the Malaysian Shari’ah-compliant firm’s capital structure variation based on a market timing behaviour. A series of regression analysis is utilised on a set of robust variables, which include the crucial Equity Risk Premium of the Malaysian Stock Market. The study utilises firm-specific and market-wide data of 77 Shari’ah-comp...
Purpose
The purpose of this paper is to examine the extent of risk shifting behavior in bonds and sukuk. The examination is significant, as economists and scholars identify risk shifting as the primary cause of the global financial crisis. Yet, the dangers of this debt-financing feature are largely ignored – one needs to only witness the record gr...
Even though the presence of large banks implies large risks and heightened vulnerability of a country’s macro economy, the presence of many small banks each with small market shares could also be a cause for systemic risks. Policy makers should not only be concerned about “too big to fail”, but should also be mindful of a fragmented banking system...
The aim of consolidation in the banking sector is mainly to create a group of strong and well-capitalized banking institutions to achieve a more effective and competitive banking system. The primary methods of consolidation employed by financial institutions are mergers and acquisitions (M&A). The banking sector being central to both the financial...
This study embodies a preliminary endeavour at analysing the impact of leverage on portfolio behaviour, with specific reference to return and volatility, in the European stock markets, using the debt ratio as one of the important benchmarks for Islamic stock screening. Given the focus of Islamic stock screening on the debt ratio, we use data from 3...
Many Muslim individual and institutional investors seek to invest only in stocks that are compliant with the Shari'ah (i.e. Islamic law). Among others, Dow Jones addressed this demand and has developed their proprietary screening methodologies to identify Shari'ah compliant firms (SC). One key factor that distinguishes SC firms from their non-compl...
This study embodies a preliminary endeavour at analysing the impact of leverage on portfolio behaviour, with specific reference to return and volatility, in the European stock markets, using the debt ratio as one of the important benchmarks for Islamic stock screening. Given the focus of Islamic stock screening on the debt ratio, we use data from 3...
Sukuk is a highly appealing alternative instrument of conventional bond in the financial
market over the last two decades. To a certain extent, the market players assume sukuk as the
same as bond. However, sukuk has its own fundamental asset backed principles, whereas
bond is backed by debt. The objective of the study is to examine the Granger-caus...
Sukuk is a highly appealing alternative instrument of conventional bond in the financial
market over the last two decades. To a certain extent, the market players assume sukuk as the
same as bond. However, sukuk has its own fundamental asset backed principles, whereas
bond is backed by debt. The objective of the study is to examine the Granger-caus...
This research is motivated by the increasing systemic relevance of Islamic finance and Islamic stock markets beyond the borders of Arabia and other Muslim majority territories. It makes the initial attempt to consider the degree to which the five Islamic stock markets in the original ASEAN-5 and their foreign exchange markets are correlated with a...
Muslim countries of the developing world suffer indebtedness resulting mostly from funding development infrastructure. Faced with a dire need for development infrastructure but with inadequate resources to fund them domestically, these governments often resort to foreign borrowing. As neither foreign banks nor international debt markets would allow...
The impact of leverage on financial market stability and the relationship with the real economy is a key concern among researchers. This paper makes an initial attempt to investigate the relationship between a firm’s leverage, return and share price volatility from an Islamic finance perspective and capital structure theory. A multi-country dynamic...
The impact of leverage on financial market stability and the relationship with the real economy is a key concern among researchers. This paper makes an initial attempt to investigate the relationship between a firm’s leverage, return and share price volatility from an Islamic finance perspective and capital structure theory. A multi-country dynamic...
The impact of leverage on financial market stability and the relationship with the real economy is a key concern among researchers. This paper makes an initial attempt to investigate the relationship between a firm’s leverage, return and share price volatility from an Islamic finance perspective and capital structure theory. A multi-country dynamic...
This study investigates both conventional and Islamic investors’ problems as to whether the inclusion of Islamic and conventional asset classes may expand the frontier of their respective portfolios. Our sample covers the global U.S. portfolios and Malaysian portfolios with multiple asset classes, as well as the portfolios with a specific asset cla...
This paper reviews the current literature on Islamic equities. Our survey indicates that the bulk of papers are quantitative or empirical in nature, with a notable dearth of theoretical works. Among the common research themes explored by these papers are comparative performances of Islamic equities vis-à-vis their conventional counterparts, compari...
This book addresses the financing of government budgets with non-debt-creating flows through risk-sharing capital market instruments. It offers a comparative analysis with conventional finance to demonstrate the ability of Islamic capital market instruments to create an impetus for economic stability and growth. Rizvi, Bacha, and Mirakhor guide rea...
This study investigates the relationship and shock transmission between firm leverage and systematic risk within the Shari’ah stock screening rules among seven European countries with a sample of 689 firms for the period from 2008 Q2 to 2013 Q1. Due to the fact that high leverage augments systematic risk and accentuates the firm’s vulnerability to...
This paper reviews the current literature on Islamic equities. Our survey indicates that the bulk of papers are quantitative or empirical in nature, with a notable dearth of theoretical works. Among the common research themes explored by these papers are comparative performances of Islamic equities vis-à-vis their conventional counterparts, compari...
Equity markets have slowly evolved over the years, and are now becoming a mainstay of the modern financial landscape. This chapter explores how the stock market has played a role in the economic development of the world. The stock market by its nature provides some advantages and some disadvantages to economic managers. With the notion of risk shar...
This chapter aims to compress our thoughts and discussion in the matter of how public policy managers tend to utilize capital markets through intervention to fulfill economic goals. With capital markets providing in their true nature a risk sharing mode, the role of Islamic finance comes into play, and the proposed macromarket and micromarket instr...
A vicious cycle of interest rates and debt have stunted the growth of developing nations, and this chapter explores the alternatives that Islamic finance and risk sharing have to offer at a sovereign level. While not only focusing on the how, this chapter delves into proposing a macro risk sharing instrument which brings to the forefront the concep...
This chapter explores the fundamental question of on what is the current economic system based. The answer lies in exploring the concept of risk, and the modes of transferring and sharing it. Based on discussions in the literature, this chapter explores how the risk shifting-based system has collapsed and how the notion of risk sharing is required....
This study investigates both conventional and Islamic investors’ problems as to whether the inclusion of Islamic and conventional asset classes may expand the frontier of their respective portfolios. Our sample covers the global U.S. portfolios and Malaysian portfolios with multiple asset classes, as well as the portfolios with a specific asset cla...
Motivated by the recent phenomenal growth in Islamic finance and the financialization of commodities, this study makes an initial attempt to investigate the risk-return profiles of optimized portfolios combining (a) Islamic equities with commodities and (b) conventional equities with commodities during the crises and non-crises periods. The finding...
Motivated by the recent phenomenal growth in Islamic finance and the financialization of commodities, this study makes an initial attempt to investigate the risk-return profiles of optimized portfolios combining (a) Islamic equities with commodities and (b) conventional equities with commodities during the crises and non-crises periods. The finding...
There is a critical gap in literature in studying the portfolio diversification opportunities available to sukuk investors and evaluating these in the light of held-to-maturity strategies usually adopted by these investors. This paper has made an initial attempt to study the portfolio diversification strategies for sukuk portfolios across heterogen...
This study is a first attempt at testing the extent of contagion for conventional and Shari’ahcompliant
stock indices. We examine the period surrounding the U.S. subprime crisis of 2007–9 and the
Lehman Brothers collapse of 2008 to determine the relative extent of contagion. We find no clear evidence
of contagion during the subprime crisis however,...
The role of regulation extends beyond ensuring stability and confidence in the financial system, as it is also a behavioral shaper of market players. The laws, standards, and guidelines issued are instrumental in creating an incentive structure for market players to behave in certain ways. Using incentive audit approach, this paper attempts to exam...
This study is a first attempt at testing the extent of contagion for conventional and Shari’ah-compliant
stock indices. We examine the period surrounding the U.S. subprime crisis of 2007–9 and the
Lehman Brothers collapse of 2008 to determine the relative extent of contagion. We find no clear evidence
of contagion during the subprime crisis however...
Across the world, debt has become a common accepted phenomenon. It is argued that it is second nature to humans to borrow and accumulate debt. As governments are a reflection of their societies, the nature of debt accumulation is continues. This chapter explores questions such as: what is government debt? Why is it even there in the first place? Ho...
Since early 1990’s, financial systems have been classified in three distinct forms: capital market-based, government credit-based and institutional credit-based. This chapter, owing to the nature of the book, focuses purely on the first system ofcapital markets. The chapter explores why the capital markets have become essential for the survival of...
The goals of economics of sovereign nations have been deliberated for decades, and much insight has gone into refining them to a standardized macroeconomic framework. Our current world, with its recurring economic crises and financial breakdowns, has raised questions on this very macroeconomic framework. In this chapter we explore the goals and obj...
The rising interest in Islamic finance and banking over the last two decades has revived the debate on the holistic framework of Islamic macroeconomics. The debate has gone on in a comparative manner with its conventional counterparts. This chapter explores the very fundamentals of Islamic economic thought enshrined in justice and risk sharing. Fro...
Risk sharing and Islamic economic philosophy long provided ideas for different nations to prosper and innovate. Some of those ideas have survived in venture capital financing, but with the passage of time risk sharing-based instruments for firms and for governments to target domestic markets have been replaced by risk shifting instruments. This cha...
Exchange Traded Funds (ETFs) are one of the most successful financial innovations of the last decades. The main focus of this study is to examine the risk adjusted performance, tracking error and trading characteristics of emerging and developed markets ETF. 43 passively managed equity ETFs have been chosen to cover both markets. The results indica...
We provide a new contribution to trading strategies by using multi-fractal de-trended fluctuation analysis (MF-DFA), imported from econophysics, to complement various momentum strategies. The method provides a single measure that can capture both persistency and anti-persistency in stock prices, accounting for multifractality. This study uses a sam...
The last decade has witnessed a rapid expansion of Islamic financial instruments with a notable proliferation of Islamic investment certificates called Sukuk. In spite of the expansion, research to appraise their growth implications remains limited. In this paper, we make the initial attempt firstly, by recognizing the structural differences within...
The last decade has witnessed a rapid expansion of Islamic financial instruments with a notable proliferation of Islamic investment certificates called Sukuk. In spite of the expansion, research to appraise their growth implications remains limited. In this paper, we make the initial attempt firstly, by recognizing the structural differences within...
Although Sukuk has been dominating the Malaysian capital market, the motivations of the firms issuing sukuk
or conventional bonds remained largely unexplored. Using the partial adjustment model, we make the initial attempt, to
test a firm’s target debt optimizing behavior and secondly, to find the firm specific determinants of target debt ratio
usi...
The last decade has witnessed a rapid expansion of Islamic financial instruments with a notable proliferation of Islamic investment certificates called Sukuk. In spite of the expansion, research to appraise their growth implications remains limited. In this paper, we make the initial attempt firstly, by recognizing the structural differences within...
Recent literature draws attention to the issue of whether heterogeneity in investment horizons has an effect on resulting investor exposures. In this article, using Malaysia as a case study, we make the first attempt to examine comovement dynamics of Islamic equity returns to identify international portfolio diversification opportunities for invest...
Although Sukuk has been dominating the Malaysian capital market, the motivations of the firms issuing sukuk or conventional bonds remained largely unexplored. Using the partial adjustment model, we make the initial attempt, to test a firm’s target debt optimizing behavior and secondly, to find the firm specific determinants of target debt ratio usi...
This paper is motivated by the heightened interest in investing inIslamic equities. The paper is the first attempt at analysing the risk-return characteristics of Islamic indices at different timescales byapplying a relatively new approach in finance known as waveletanalysis. We analyze the Dow Jones indices of 11 countries, mostlyemerging markets,...
A major issue in both Islamic finance and conventional finance is whether the shocks to the volatilities in the asset returns are substitutes or complements in terms of taking risk. An understanding of how volatilities of and correlations between asset returns change over time including their directions (positive or negative) and size (stronger or...
