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PurposeThe purpose of this paper is to investigate the efficiency of selected conventional and Islamic unit trust companies in Malaysia during the period 2002 to 2005.Design/methodology/approachThe paper adopts Data Envelopment Analysis (DEA) to investigate efficiency, as measured by the Malmquist index, which is decomposed into two components: efficiency change and technical change indexes.FindingsThe study indicates that technical efficiency is the main contributor to enhancing the efficiency of the Malaysian unit trust industry. In addition, the larger the size of the unit trust companies, the more inefficient the performance. In comparing the efficiency of unit trust companies, the study finds that some of the Islamic unit trust companies perform better than their conventional counterparts.Research limitations/implicationsThe study is limited to five Islamic unit trust companies. Thus, the findings of this study are indicative, but inconclusive for the unit trust industry as a whole.Practical implicationsThe results have two important implications for both conventional and Islamic unit trust companies in Malaysia. First, the deterioration of total factor productivity (TFP) in the unit trust industry in Malaysia is due to the deficiency of innovation in technical components. Second, the size of the unit trust companies has an adverse effect on the TFP performance.Originality/valueThe contribution of this study is that it analyzes the efficiency of the two types of unit trust industry which are important and relevant for Malaysia. This significance arises from the dual financial system, in which the Islamic unit trust companies operate in parallel with their conventional counterparts. The comparison sheds some light on the performance of the Islamic unit trust companies, whose operations are based on profit‐sharing, in contrast to the conventional unit trust companies.

Purpose -The purpose of this paper is to assess the contribution of Islamic finance to economic growth in countries that were early adopters of Islamic banking: Malaysia, Indonesia and the Gulf Cooperation Council (GCC) countries. Design/methodology/approach -Through panel cointegration analysis, variance decompositions (VDCs) and impulse response functions, this study investigates the Islamic finance and growth nexus. Findings -Islamic banking is found to contribute to economic growth both in the long run and the short run for both GCC countries and the selected East Asia (EA) countries. In the short run however, Islamic banking contributes more to economic growth in Malaysia and Indonesia compared to the GCC countries. Practical implications -The results lend support to the view that Islamic intermediation not only leads to economic benefits but also; increases managers' entrepreneurial skills through the involvement of the lender in the decision making and the partnership like relationship between the fund provider and the entrepreneur and also; reduces agency costs which produces positive impact on both the economy and the development of the society. This serves as a motivation for other countries to continuously promote Islamic finance. Originality/value -To assess the importance of Islamic finance to economic growth, this study compares two main regional Islamic financial hubs, the GCC and EA countries. Another novel aspect of this study is in the methodology; it employs panel cointegration analysis, VDCs and impulse response functions on the set of annual data for period of 2000-2009.

Purpose-The purpose of this paper is to explore the extent to which macroeconomic variables affect the Islamic stock market behavior in Malaysia in the post 1997 financial crisis period. Design/methodology/approach-The paper employs the latest estimation technique of autoregressive distributed lag (ARDL) model approach to cointegration. Findings-The results suggest that real effective exchange rate, money supply M3, treasury bill rate (TBR) and federal fund rate (FFR) seem to be suitable targets for the government to focus on, in order to stabilize the Islamic stock market and to encourage more capital flows into the market. As for the interest rates and stock returns relationship, the paper finds that when interest rates rise either domestically (TBR) or internationally (FFR), the Muslim investors will buy more Shari'ah compliant stocks; thereby escalating the Islamic stock prices. Research limitations/implications-The results of this study are limited to the post 1997 financial crisis period until the beginning of the year 2006 for a small open economy, Malaysia. Practical implications-The paper reveals that both changes in the local monetary policy variables and in the US monetary policy as measured by the changes in the FFR have a significant direct impact on the Islamic stock market behavior in Malaysia. Originality/value-The paper adopts the latest time series econometrics technique to test for cointegration, ARDL. And it is among the earliest attempts to investigate the long-run effects of the macroeconomic variables changes either domestically or internationally on the Islamic stock market.