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How does capital structure affect firm performance of Authorised Deposit-taking Institutions (ADIs) using explicitly Australian data? This paper investigates the relationship between capital structure and firm performance of Australian ADIs. Our findings show a significant and robust quadratic relationship between capital structure and firm performance of Australian ADIs. At relatively low levels of leverage an increase in debt leads to increased profit efficiency hence superior bank performance, at relatively high levels of leverage increased debt leads to decreased profit efficiency as well as bank performance. This can most likely be attributed to financial distress outweighing any gains made from managerial performance improving.

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This paper extends the recent work of Mansor et al. [1] who use panel regression to measure ethics based Islamic mutual fund performance and note the various methodological issues in this respect. We attempt to capture the co-movement and dependence structure of the fund index with five major equity indices before and during the Global financial crises (GFC). Four models-CAPM, normal Copula, symmetrised Joe-Clayton Copula and Rotated Gumbel Copula-are used to analyse the co-movement and dependence structure of Islamic investment funds. Our findings show that the ethical investment funds have low dependence with the major market indices. The fluctuations in the financial markets in the U.S., the U.K., Germany and Japan are less likely to affect the Islamic investment funds than other financial assets. However, the time-varying dependence increases dramatically during the GFC indicating that the diversification merits of Islamic equity funds in the portfolio deteriorate in the bear market. Some of the empirical results drawn in this paper will raise awareness among both academicians and financiers about the importance of Islamic investment funds during and out of crises periods.