Do Islamic fundamental weighted indices outperform their conventional counterparts? An empirical investigation during the crises in the MENA region

Abadi, Rasha Tawfiq Yousif; Silva, Florinda

doi:10.1007/s40822-020-00158-x

Cited by 8 publications

(7 citation statements)

References 31 publications

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“…López Mejía et al., 2014 ; Kabir and Worthington, 2017 ) claim that the role of Islamic banks in the performance and stability of the banking system is overemphasised in the literature as the size of this segment remains small. Abbadi and Silva (2020) warn that the empirical findings on the superiority of Islamic metrics over conventional metrics depends on the dataset under consideration, period of the study, and measures used.…”

Section: Literature Reviewmentioning

confidence: 99%

“…By contrast, Islamic banking, which is showcased as an alternative to the conventional model ( Wasiaturrahma et al., 2020 ), has only recently emerged due to the Muslims’ demand for an Islamic- Sharia compliant mode of banking ( Bitar et al., 2020 ). Sharia governs the permissibility of the different aspects of Islamic financial institutions' activities based on two fundamental principles ( Sundararajan and Errico, 2002 ; Cihák and Hesse, 2010 ; Beck et al., 2013 ; Abbadi and Silva, 2020 ). First, banks are prohibited from engaging in usury or riba -based transactions which involve charging or earning interest.…”

Section: Introductionmentioning

confidence: 99%

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Does Islamicity matter for the stability of Islamic banks in dual banking systems?

Bakhouche

Ghak

Al-Shiab

2022

Heliyon

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Does Islamicity matter for the stability of Islamic banks in dual banking systems?

Bakhouche

Ghak

Al-Shiab

2022

Heliyon

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“…In addition, the purpose of Shariah governance is to ensure compliance of IBs with Islamic finance principles and Islamic moral values (Ariffin et al, 2021). The Shariah supervisory board has a duty to protect investors' interests against opportunistic behavior (Abadi and Silva, 2020). Srairi (2015) empirically analyzes the influence of corporate governance on the performance of IBs with cross-country samples.…”

Section: Corporate Governance and Bank Performancementioning

confidence: 99%

Does bank governance affect risk and efficiency? Evidence from Islamic banks in GCC countries

Srairi

Bourkhis

Houcine

2021

IMEFM

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Purpose The motivation of the study is to shed further light on the question of whether the governance structure of Islamic banks (IBs) has an impact on the efficiency and risk of Islamic banks operating in the Gulf Cooperation Council (GCC) after the global financial crisis and during the period 2010–2018. This study aims to examine the extent of governance structure on the efficiency and risk of IBs as the effect of the financial crisis has been less on IBs. In addition, the authors are interested in the GCC region as it represents the hub of Islamic finance. Design/methodology/approach In this study, the authors examine how the banking governance structure affects the risk-taking and performance of IBs in the GCC countries between 2010 and 2018. The authors construct a banking governance index (CGI) composed of sub-indices for the board structure, risk management, transparency and disclosure, audit committee, Sharia supervisory board and investment account holders. Unlike the majority of previous studies, bank performance is measured with technical efficiency scores using a data envelopment analysis and the authors use a comprehensive CGI. Findings The results show that IBs in GCC countries adhere to 54% of the attributes covered in the CGI. The authors also note a lack of disclosure regarding the investment account holders and the audit committee. As well, the results indicate that bank governance is positively associated with risk-taking and bank efficiency. Banking risk is influenced by the Sharia board and risk management while bank efficiency is affected by the characteristics of the board structure and investment account holders. Originality/value To the best of the authors’ knowledge, this is the first study that has developed a comprehensive governance index for IBs in GCC countries that includes a wide range of governance dimensions. The study contributes to the literature on governance in the banking sector by simultaneously examining its impact on the risk-taking and efficiency of IBs and recognizes the dynamic relation between these three variables for IB.

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“…Findings report an additional concern of the investors in Shariah-compliant stocks and this, in turn, may affect analyst coverage and liquidity by affecting “informational efficiency.” Second, the exclusion of some sectors from the Shariah-compliant stock and some of the “cross-sectional patterns” in returns are due to the nature of the industry (Zaremba and Umutlu, 2018). Abadi and Silva (2020) investigate the performance of Islamic fundamental weighted portfolios in comparison with their non-Islamic counterparts and examine their performance during crisis in Middle East and North African regions. They conclude that the Islamic fundamental weighted portfolios do not protect investors from the losses during crisis period.…”

Section: Literature Reviewmentioning

confidence: 99%

Investigating beta anomaly: comparison of Shariah-compliant and conventional stocks

Qamar

Hassan

Nazir

et al. 2021

IMEFM

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Purpose The purpose of this paper is to examine the impact of dividend announcements on the stock return of Shariah-compliant and conventional stocks. Design/methodology/approach An event study methodology is applied to study the beta anomaly. Market-adjusted return model, mean-adjusted return model and market model have been applied to calculate excess returns. Estimation period used in this study is 130 days, and event period consists of 21 days in total, i.e. starting from the day –10 “before the cash dividend announcement” to day +10 “after the cash dividend announcements. Findings It has been concluded from the results that dividend plays an informational role in the Pakistan Stock Exchange. As the investors in Pakistan react favorably to the dividend increase announcements and unfavorably to the dividend decrease announcements, they consider dividend increase announcement as good news and dividend decrease announcement as bad news. Practical implications The findings of this study have several implications for different participants of the stock market, such as investors, academicians, researchers, fund managers and policymakers. They can use this information to make decisions while making efficient portfolios. Investors may get abnormal returns by focusing on the dividend announcement patterns. This can influence the attitude of investors toward efficient investments in the stock market and ultimately contribute to the betterment of society. This study is also beneficial for academicians and researchers, as it provides a comparative analysis of Shariah-compliant and conventional stocks and the anomalous effect of dividend announcements on stock return. Originality/value Limited research in the world’s context and null is available in Pakistani context on the subject matter. The comparative analysis of “Shariah-compliant” and “conventional” stocks provides insight into the asset pricing of Shariah-compliant stocks that have not been explored earlier. This study also uses three different methods (mean model, market model and market-adjusted return models) to compare Shariah-compliant and conventional stocks

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Do Islamic fundamental weighted indices outperform their conventional counterparts? An empirical investigation during the crises in the MENA region

Abstract: Do Islamic fundamental weighted indices outperform their conventional counterparts? An empirical investigation during the crises in the MENA region. Eurasian Economic Review (2020).

Cited by 8 publications

References 31 publications

Does Islamicity matter for the stability of Islamic banks in dual banking systems?

Does Islamicity matter for the stability of Islamic banks in dual banking systems?

Does bank governance affect risk and efficiency? Evidence from Islamic banks in GCC countries

Investigating beta anomaly: comparison of Shariah-compliant and conventional stocks

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