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Does Shariah finance have any impact on the cost of debt? The existing literature on Shariah finance revolves around its effect on the macroeconomic level but remains poor when looking at its impact on the corporate level. The purpose of this paper is to strengthen the latter by examining the relationship between the Shariah compliance level and the interest rate.

The authors have used a sample of 600 companies, all Shariah-compliant but with different levels of compliance, from 2002 to 2015. A variable determining the level of Shariah compliance was created in accordance with the methodology by S&P 500 Shariah and its underlying index S&P 500; then, a Probit relapse study was conducted to identify the impact of Shariah level on the cost of debt.

Consistent with the theoretical predictions of the authors, the findings reveal that there is a positive relationship between the level of Shariah compliance and the cost of debt, suggesting that the higher the level of Shariah compliance of a firm, the higher the interest rate.

One important portfolio implication of this study is that the level of Shariah compliance plays a major rule in the cost of debt determination besides the firm-specific factors. The revealed results can be of interest to actors in the fields of corporate finance, corporate governance, decision-makers and investors.

Islamic finance has been one of the most studied and researched topics in the finance world. However, the interest of scholars thoroughly assessed the dynamics of Islamic banking. The effect of Shariah compliance on corporate finance can still be more explored. To the best of the authors’ knowledge, this is a first attempt to capture the effect of Shariah compliance on the cost of debt through the use of a large scope to enrich the literature and at the same time analyzing the effects of Islamic characteristics on firms’ fundamentals.

This paper aims to document the impact of Ramadan on the optimism of analysts’ recommendations taking as a sample the countries of the MENA region during the period between 2004 and 2015. The choice of these countries can be explained by the fact that their population is predominantly of a Muslim faith (The Future of World Religions: Population Growth Projections, 2010-2050, 2015).

The authors used univariate and multivariate regression models to highlight the existence of the Ramadan effect on the optimism of analysts. They have found that pre-holiday optimism is significantly lower than post-holiday optimism.

This paper also documented the effect of analysts’ experience and information uncertainty on the analysts’ optimism level that allowed us to infer that low experience enhances optimism, while environment with low information uncertainty tends to decrease the level of optimism.

Previous research on this topic has investigated the effect of months of the year, turns of the month and days-of-the-week on the behavior of stock exchanges. Another strand of the literature also analyzed the effect of holidays on the latter. However, this is the first attempt to investigate this effect on analysts’ recommendations optimism when the holiday period is related to Islam.