Volatility Spillover among Equity Indices and Crude Oil Prices:
Evidence from Islamic Markets

Majdoub, Jihed

doi:10.4197/islec.31-1.2

Cited by 7 publications

(6 citation statements)

References 21 publications

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“…See Majdoub et al[57,58,59] for an examination of the merits of Islamic financial markets in alleviating the transmission of shocks across jurisdictions in periods of distress.…”

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confidence: 99%

Regulatory policies in the global Islamic banking sector in the outbreak of COVID-19 pandemic

2021

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This paper forecasts the response of Islamic banks’ dynamics (size, profitability, nonperforming financing, and stability) to the COVID-19 pandemic over the period ranging from 2019Q4 to 2021Q4. Nine jurisdictions are considered based on their Islamic banks’ systemic importance, namely Bahrain, Brunei, Indonesia, Kuwait, Malaysia, Pakistan, Saudi Arabia, Turkey, and UAE. Using the bivariate VARX model, our forecasting exercise shows that the Islamic banks’ response to the COVID-19 pandemic is not uniform across jurisdictions. While the Islamic banks’ dynamics in Saudi Arabia, UAE, and Kuwait are less likely to be impaired, Bahrain, Brunei, Malaysia, Pakistan, and Turkey are expected to be relatively more affected especially in terms of their size growth. Saudi Arabia will continue leading the growth momentum of the global Islamic banking sector, and its Islamic banks’ assets are expected to reach at least $185.4 billion by the end of the fourth quarter of 2021. This paper recommends a prioritization approach for the implementation of the policy measures by the jurisdictions based on their banks-specific responses to the COVID-19 pandemic.

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“…See Majdoub et al[57,58,59] for an examination of the merits of Islamic financial markets in alleviating the transmission of shocks across jurisdictions in periods of distress.…”

mentioning

confidence: 99%

Regulatory policies in the global Islamic banking sector in the outbreak of COVID-19 pandemic

2021

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“…Notes 1. See Majdoub et al (2014Majdoub et al ( , 2016Majdoub et al ( , 2018 for a discussion of the merits of the Islamic finance intermediation mode.…”

Section: Discussionmentioning

confidence: 99%

Toward new strategies of Islamic financial products development

Mansour

2020

JIABR

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Purpose This paper aims to propose a conceptual framework for the assessment of Islamic financial products’ development. Design/methodology/approach A coordinate grid with two perpendicular axes (profitability and compliance to Shari’ah) is developed and used to produce a nine-zone matrix. The research design is further developed by using a linear, composite index to assess product development feasibility and specifications. Subsequently, three strategic paths are identified: profitability-led strategic path, compliance-led strategic path and intermediate strategic path. Findings The findings indicate that the ideal strategic behavior the Islamic financial institutions have to borrow corresponds to the intermediate strategic path because it optimizes the trade-off between the two attributes under consideration. A proper development strategy of Islamic financial products should not ignore the compliance to the substance of Shari’ah and combine it simultaneously with profitability. Originality/value The paper’s originality consists in the identification of the portfolio of Islamic financial products’ strategic positioning in the nine-zone matrix and the determination of the most suitable product development strategy.

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“…2. See Majdoub and Mansour (2014), Majdoub et al (2016, 2018), Bedoui and Mansour (2015), and Mansour et al (2015-a) for an examination of the theoretical foundation of equity-based contracts.…”

Section: Notesmentioning

confidence: 99%

Adverse selection analysis for profit and loss sharing contracts

Ajmi

Aziz

Kassim

et al. 2019

IMEFM

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Purpose The purpose of this paper is to determine the optimal profit-and-loss sharing (PLS)-based contract when market frictions occur. Design/methodology/approach This paper opts for an adverse selection analysis and Monte Carlo simulation to assess the less risky contract for the principal and the agent when musharakah, mudarabah and venture capital financings are used in imperfect markets. Furthermore, this framework enables us to capture the level of market frictions that the principal can bear and the level of audit that he/she may undertake to mitigate bankruptcy. Findings The simulation results reveal that Musharakah is the less risky contract for the principal compared to Mudarabah and venture capital when the shock is low and high. Furthermore, our findings indicate that the increase of market frictions engender higher audit cost and profit-sharing ratios. The increase of the safety index in the case of high shock is most likely attributed to the increase of the audit parameter for all contracts to mitigate the selfish behavior of the agent. Accordingly, the principal tends to require a higher profit-sharing ratio to compensate for the severer information asymmetry. Research limitations/implications This paper has two main limits. First, the results were not compared to real data because the latter are not available. Second, this paper is a general framework to determine the less risky contract for the principal and does not consider the firm and sectoral characteristics. However, it can be extended in various ways where stress can be put on conflicts of interest between the principal and the agent with the aim to determine the contract that aligns their interests. In addition, the examination of firm dynamics in the case of equity and debt financing can provide further arguments for economic agents regarding the value of the firm, the growth rate and the lifetime of the project when information is asymmetrically distributed. Practical implications The findings shed some light on the necessity of the Islamic finance experts to re-think of the promotion of Musharakah because it dominates the two other contracts when market frictions occur. Social implications Although Maghrabi and Mirakhor (2015), Alanzi and Lone (2015) and Lone and Ahmad (2017) among others showed that profit and loss sharing can ensure economic growth, findings may motivate economic players to consider Musharakah financing with the aim to reach financial inclusion and social, which is in line with Shari’ah requirements and Islamic values. Originality/value Although several papers highlighted the financial contracting theory from Shari’ah perspective, they ignored the financial issues that are associated to adverse selection. This paper provides theoretical evidence regarding the selection of the less risky financing mode in case of equity financing using Monte Carlo simulation.

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Volatility Spillover among Equity Indices and Crude Oil Prices: Evidence from Islamic Markets

Cited by 7 publications

References 21 publications

Regulatory policies in the global Islamic banking sector in the outbreak of COVID-19 pandemic

Regulatory policies in the global Islamic banking sector in the outbreak of COVID-19 pandemic

Toward new strategies of Islamic financial products development

Adverse selection analysis for profit and loss sharing contracts

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