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Article
Publication date: 16 March 2015

Nai Chiek Aik, M. Kabir Hassan, Taufiq Hassan and Shamsher Mohamed

– This paper aims to examine the productivity and spillover effect of Malaysian horizontal merger and acquisition (M&A) activities in the long run.

Abstract

Purpose

This paper aims to examine the productivity and spillover effect of Malaysian horizontal merger and acquisition (M&A) activities in the long run.

Design/methodology/approach

In terms of analytical tools, economic value added (EVA) and data envelopment analysis (DEA) are used.

Findings

The results of this study reveal that M&As in the absence of antitrust laws could be driven by managerial self-interest to create market power instead of realizing synergistic gains. Also, in Malaysia, the non-merging rival firms have significantly higher productivity improvement than the control bidder firms, and therefore, this study has identified the spillover effect as a behavior of M&A reaction.

Originality/value

This paper differs from previous studies in that it attempts not only to examine the real long-term gains of horizontal M&A activities in Malaysia but also the spillover effects of M&A activities on similar but non-merging firms.

Details

Management Research Review, vol. 38 no. 3
Type: Research Article
ISSN: 2040-8269

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Article
Publication date: 9 July 2018

Ziyaad Mahomed, Shamsher Ramadilli and Mohamed Ariff

The effects of capital-raising announcements have long been used as an indicator of increased shareholder wealth (Brown and Warner, 1985). Studies on bond announcements…

Abstract

Purpose

The effects of capital-raising announcements have long been used as an indicator of increased shareholder wealth (Brown and Warner, 1985). Studies on bond announcements, for example, have been largely inconclusive. However, when effects are measured based on bond underlying structure, “straight and convertible bonds”, then the results are more conclusive (Abdul Rahim, 2012). Furthermore, issuances around crisis period are expected to result in negative market reaction as investors prefer liquidity (Fenn, 2000).

Design/methodology/approach

Sukuk are bond-like instruments that are issued based on the Sharia guidelines and perceived to be less risky due to their risk sharing attribute. Sukuk are issued by the governments and also corporations. Sukuk can either be debt-based or equity-based. The former resembles the conventional bond, and equity-based Sukuk resembles the convertible bonds. It is interesting to ascertain the market reaction to issuance of both type of Sukuk. This study determines the wealth effects of debt-based Sukuk issuances in Indonesia, around crisis period. Sukuk issues have steadily increased in Indonesia, and it is the second largest issuer in 2015 (Zawya, 2015a, 2015b).

Findings

The market reaction to corporate Sukuk issuance by Indonesian firms is yet to be documented, and the findings of this study address this issue, especially during the crisis period when the risk aversion is high and investors prefer liquidity. The Bai and Perron’s (2003) multiple breakpoint analysis was applied to determine the crisis period, which was between 2007 and 2010.

Originality/value

The findings suggest that the market reacts positively and significantly to debt-based Sukuk issuance during the crisis period, contrary to the theory that postulates a negative market reaction. Though these findings seem to be unique, it is possible that it is a behavioral effect of investors requiring less liquidity premium during crisis, contrary to expectations (Chen et al., 2007; Amihud and Mendelson, 1986).

Details

Journal of Islamic Accounting and Business Research, vol. 9 no. 4
Type: Research Article
ISSN: 1759-0817

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Article
Publication date: 29 November 2018

Essia Ries Ahmed, Md Aminul Islam, Tariq Tawfeeq Yousif Alabdullah and Azlan bin Amran

The purpose of this paper is to find applicable Islamic pricing benchmarks (IPBs) instead of the market interest rates which are currently used in Islamic finance as benchmark.

Abstract

Purpose

The purpose of this paper is to find applicable Islamic pricing benchmarks (IPBs) instead of the market interest rates which are currently used in Islamic finance as benchmark.

Design/methodology/approach

The suggested model (Islamic pricing benchmark model (IPBM)) obviously reveals the feasibility and practical effectiveness of a substitute to London Interbank Offered Rate (LIBOR) and as an evaluator tool to suggested investment projects. The model is a suggested mechanism which could be used as an alternative choice to the conventional borrowing based on the forbidden Riba or on interest. The suggested IPBM depends on estimating the rate of return for any project on consideration of the cash flows in future which is expected to be relative to the invested capital.

Findings

The IPBM approach might be applied to financial tools, where the fund owner bears the loss since it is not because of negligence. An instrument to help identify the investment for target rates of return (as an alternative choice to LIBOR) to identify a breakeven point based on expected cash flows for the project to be financed instead of based on seeking the indicators of interest or Riba (as LIBOR). This feature of the IPBM model as an Islamic benchmark renders it as a Shariah pricing mechanism for the Islamic financial products.

Practical implications

The IPBM could be used as a financial instrument to assist in identifying the investment for the target return rates to determine a breakeven point based on expected cash flows for the project to be funded instead of being based on seeking the interest indicators or Riba (as LIBOR). This feature as an Islamic benchmark is considered as a Shariah pricing mechanism for the Islamic financial products. In particular, the proposed model incorporates the Shariah parameters. In that, it is hoped that the Islamic financial instruments will be more comprehensive in their Shariah compliance and thereby may bring more credibility to the Islamic financial system in general.

Originality/value

This paper highlights several important issues related to the IPBMs in Islamic financial institutions which are not widely discussed among researchers. This study contributes to finding an alternative IPB for the Islamic financial products which is currently using the conventional interest rate (LIBOR) as its benchmark. The current study provides empirical evidence for the possibility of relying on the IPBM as an Islamic benchmark to price Islamic financial transactions.

Details

Benchmarking: An International Journal, vol. 25 no. 8
Type: Research Article
ISSN: 1463-5771

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Article
Publication date: 17 February 2021

Ezzeddine Ben Mohamed, Neama Meshabet and Bilel Jarraya

This study aims to discuss the determinants of Islamic banks’ efficiency. It tries to explore the source of Islamic banks’ inefficiencies to propose solutions to guarantee…

Abstract

Purpose

This study aims to discuss the determinants of Islamic banks’ efficiency. It tries to explore the source of Islamic banks’ inefficiencies to propose solutions to guarantee an acceptable level of technical efficiency of such banks in Gulf Cooperation Council (GCC) countries.

Design/methodology/approach

To achieve this objective, the authors use a parametric approach, especially, the stochastic frontier approach, using production function and panel data analysis. The authors apply a package Frontier 4.1 for the estimation process, which is composed of two principal steps. In the first step, the authors estimate Islamic banks’ efficiency scores in different GCC countries based on an output distance function. In the second step, the analysis highlights the impact of managerial-specific education on Islamic accounting and finance, scarcity of Sharīʿah scholars, the board independence and chief executive officers’ (CEOs) duality on GCC Islamic banks’ efficiency.

Findings

This study’s results document that managerial-specific education on Islamic accounting and finance and the board of directors’ composition, especially, the board’s independence, can largely explain the technical efficiency scores of Islamic banks in GCC countries. Especially, the authors find evidence that managerial-specific education is negatively associated with the inefficiency term. The coefficient of the Sharīʿah scholar’s variable has a positive sign indicating that the more there are Sharīʿah experts, the more the bank is efficient. In addition, CEOs’ duality seems to have no significant effect on GCC Islamic banks’ efficiency.

Practical implications

GCC Islamic banks need to improve the presence of independent members on the board of directors. In addition, these banks are invited to count more on Sharīʿah auditors and educated staff characterized by a high level of competency in the domain of Islamic banking and finance.

Originality/value

To the best of the authors’ knowledge, this is the first study that highlights the effect of managerial-specific education in Islamic accounting and finance and scarcity of Sharīʿah scholars on Islamic banks’ efficiency.

Details

Journal of Islamic Accounting and Business Research, vol. 12 no. 2
Type: Research Article
ISSN: 1759-0817

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Article
Publication date: 28 June 2013

Farhana Ismail, M. Shabri Abd. Majid and Rossazana Ab. Rahim

The main purpose of this paper is to examine cost efficiencies of the selected Islamic and conventional commercial banks over the period of 2006 to 2009 in Malaysia.

Abstract

Purpose

The main purpose of this paper is to examine cost efficiencies of the selected Islamic and conventional commercial banks over the period of 2006 to 2009 in Malaysia.

Design/methodology/approach

Data envelopment analysis (DEA) was initially used, to investigate the cost efficiency of the Malaysian banking sector and followed by Tobit regression analysis determine factors influencing the efficiency of Islamic and conventional banks in Malaysia.

Findings

The DEA results reveal technical efficiency as the main contributor of cost efficiency for conventional commercial banks and allocative efficiency as the main contributor for cost efficiency of Islamic commercial banks. This indicates conventional commercial banks have been efficient in utilizing information technology and electronics. Islamic commercial banks conversely have been efficient in allocating and utilizing their resources. Additionally, scale efficiency is found to be the main source of technical efficiency for both Islamic and conventional commercial banks, denoting that size is important in improving bank efficiency. The results of Tobit regression analysis are twofold. First, it documents capitalization and bank sizes are positively and significantly associated to efficiency. Secondly, loan quality is found to be negatively and significantly associated to efficiency.

Originality/value

This paper contributes to the body of knowledge through its literature discussions on the efficiency of both Islamic and conventional banks and the effect of banks' specific characteristics on their efficiency.

Details

Journal of Financial Reporting and Accounting, vol. 11 no. 1
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 24 February 2020

Syed Faheem Hasan Bukhari, Frances M. Woodside, Rumman Hassan, Omar Massoud Salim Hassan Ali, Saima Hussain and Rabail Waqas

The purpose of this paper is to investigate the key attributes that drive Muslim consumer purchase behavior in the context of imported Western food in Pakistan.

Abstract

Purpose

The purpose of this paper is to investigate the key attributes that drive Muslim consumer purchase behavior in the context of imported Western food in Pakistan.

Design/methodology/approach

In-depth, semi-structured interviews were used as a data collection tool. In this research, the in-depth interview data were analysed by using the manual content analysis (MCA) technique. Moreover, Leximancer software was used to reanalyse the data to enhance the trustworthiness of the MCA results. A total sample of 43 Muslim consumers from three metropolitan cities in Pakistan participated in the research. The sample comprises professionals, housewives and both college and university students.

Findings

Muslim consumers in Pakistan look at both the intrinsic and extrinsic attributes when purchasing imported Western food. The ruling factors explored were product taste, ingredients, freshness, hygiene, brand name and overall product quality. However, product packaging and labeling also play a significant role. Participants were of the view that imported Western food provides a better, unique consumption experience and an opportunity to choose from a wide variety of food options. Interestingly, interview findings reveal that Western food product attributes surpass the Islamic concept of moderate spending, thus convincing Muslim consumers to engage in the consumption of imported Western food.

Social implications

The presence of imported Western food may improve quality of life by having more opportunities and healthier options for the nation. If the Western food products are stamped Halal or made with Halal ingredients the product has a fair chance of adoption and penetration in the society. Further, it may result in overall health improvements within the society, which is already a major concern in the Pakistani consumer market. Also, food products coming from the Western world induces mindfulness; people are more aware about innovative and useful ingredients that can satisfy their taste buds.

Originality/value

This paper found that Pakistani Muslim consumers are not really concerned about the Islamic concept of moderate spending, and thus, established that Pakistani Muslim consumers are more concerned about product value rather than their Islamic teaching of moderate spending. From a population, with 97 per cent Muslim majority, product packaging and labeling were found to be a dominant and deciding factor, which, in itself, is an interesting finding. Further, established Western brand names help Muslim consumers to recognize products and plays a vital role in their purchase decisions. However, within product labeling, the element of halal ingredients was found to be a deciding factor, but not a leading factor, in purchase decisions.

Details

Journal of Islamic Marketing, vol. 12 no. 1
Type: Research Article
ISSN: 1759-0833

Keywords

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Article
Publication date: 16 October 2017

Mohamed Ali Trabelsi and Naama Trad

The purpose of this paper is to examine whether Islamic finance could replace or complement the traditional financial system and could guarantee stability in times of crisis.

Abstract

Purpose

The purpose of this paper is to examine whether Islamic finance could replace or complement the traditional financial system and could guarantee stability in times of crisis.

Design/methodology/approach

To achieve the aim, the authors examined both risk-taking and profitability of 94 Islamic banks (IBs) operating in 18 countries observed during the 2006-2013 financial crisis period. A series of bank-specific and other country-specific indicators are combined to explain profitability of IBs as measured by return on assets and return on equity, and risk divided into credit risk measured by impaired loans/gross loans and total equity/net loans, and insolvency risk measured by Z-score. Indeed, a bank is stronger than another if it is stable with a higher capacity to absorb risks, on the one hand, and increased performance on the other.

Findings

Using dynamic panel data econometrics (generalized moment method system), the authors estimated five regressions and found the following results: bank capital is found to be the main indicator that contributes to maximizing profitability and stability of IBs and reducing their credit risk. However, the study of liquidity and asset quality determinants often leads to inconclusive results. Nevertheless, they found that Gulf region-operating IBs are more profitable, more solvent and less risky than those operating in the South East Asian region. At the macroeconomic level, the authors could not find a significant relationship between inflation rate and IBs profitability. However, unlike for IBs in Southeast Asia, the authors found that inflation rate improves IBs stability and reduces their credit risk level.

Practical implications

The results of this study have numerous implications for bank management and the different stakeholders (investors, customers). This study identified several factors that may help bank managers to improve their financial outlook by controlling risk level and profitability. These factors could as well help to understand how macroeconomic indicators affect both banking risk and profitability, in particular Islamic banking. Likewise, portfolio managers can use these results to support their decisions to include IBs in their assets portfolios to mitigate potential risk.

Originality/value

This study contributes to the existing literature in two ways. First, this paper provides fresh data and recent information on Islamic banking in Gulf Cooperation Council and South East Asian countries. Second, the obtained results helped us to conclude that the Islamic financial system cannot replace but rather supplements the traditional system. This result may be explained by the fact that Muslims look for Islamic banking products, which conventional banks are not offering.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 10 no. 4
Type: Research Article
ISSN: 1753-8394

Keywords

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Article
Publication date: 23 December 2020

Ririn Tri Ratnasari, Ulfa Fadilatul Ula and Raditya Sukmana

This study aims to investigate the effects of religiosity level on the shopping orientation and behavior of Muslim customers and how to store image moderates this relationship.

Abstract

Purpose

This study aims to investigate the effects of religiosity level on the shopping orientation and behavior of Muslim customers and how to store image moderates this relationship.

Design/methodology/approach

This study uses a positive approach and partial least square analysis technique on samples of Muslim customers in major cities in Indonesia, who have purchased products in the Syariah supermarket such as Sakinah Supermarket and 212 supermarkets at least twice within the past three months. The sampling method used in this study is convenience sampling, with a total of 117 respondents.

Findings

The results reveal that religiosity level significantly affects the Muslim customers’ shopping orientation subsequently impacts consumer shopping behavior. The result is in line with the rising trend by a society that begins to define successful businesses that touch upon the spiritual aspects of the shoppers. Customers with higher religiosity prefer higher quality products and customers who have lesser levels of religiosity establish different shopping characteristics and behavior. This eventually forms an orientation in shopping behavior. Furthermore, it is found that the store image significantly strengthens the influence of the impact of shopping orientations on Muslim customers’ behavior.

Practical implications

Marketers can increase the image of Islamic stores by implementing the principle of a smile, greeting, address to every customer who shops, managing the cashier queue to prevent ikhtilath (meeting between men and women) and adding decorations and calligraphy ornaments. Marketers can create membership cards, posters or billboards about the products that are being discounted or promoted to increase customer numbers image enhancement.

Originality/value

This study used specific variables that represent religiosity in the retail sector. It offers an analysis of how Muslim customers’ religiosity can affect their shopping orientation and behavior. The study is conducted in Indonesia, where research on this topic is still limited.

Details

Journal of Islamic Accounting and Business Research, vol. 12 no. 1
Type: Research Article
ISSN: 1759-0817

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Article
Publication date: 10 May 2011

Shuk‐Wern Ong, Voon Choong Yap and Roy W.L. Khong

The objective of this paper is to develop a model that can predict financial distress amongst public listed companies in Malaysia using the logistic regression analysis.

Abstract

Purpose

The objective of this paper is to develop a model that can predict financial distress amongst public listed companies in Malaysia using the logistic regression analysis.

Design/methodology/approach

The logistic regression analysis used in this paper is geared towards developing a model that can predict financial distress amongst public listed companies in Malaysia.

Findings

The results prove that five financial ratios have been found to be significant and useful for corporate failure prediction in Malaysia. The overall predictive accuracy is 91.5 percent and this demonstrates that the logistic regression analysis used is a reliable technique for financial distress prediction. In addition, the predictive accuracy of the model in this paper is higher than that of previous studies, which utilised discriminant analysis rather than the method adopted in this research.

Originality/value

The economic crisis mostly began to affect Malaysia's economic standing in July 1997 causing many companies to fall into financial distress, as they were unable to cope with the unexpected downturn. A financial distress prediction model is therefore required to act as a predictor of Malaysian public listed companies' well‐being prior to a financial crisis and to gauge the warning signals of the onset of a downturn in order to strategize their survival techniques during this phase. This study focuses on public listed companies in Malaysia, thus the model adopted is tailored to suit the given context.

Details

Managerial Finance, vol. 37 no. 6
Type: Research Article
ISSN: 0307-4358

Keywords

Content available
Article
Publication date: 4 January 2021

Sherin Kunhibava, Zakariya Mustapha, Aishath Muneeza, Auwal Adam Sa'ad and Mohammad Ershadul Karim

This paper aims to explore issues arising from ṣukūk (Islamic bonds) on blockchain, including Sharīʾah (Islamic law) and legal matters.

Abstract

Purpose

This paper aims to explore issues arising from ṣukūk (Islamic bonds) on blockchain, including Sharīʾah (Islamic law) and legal matters.

Design/methodology/approach

A qualitative methodology is used in conducting this research where relevant literature on ṣukūk was reviewed. Through a doctrinal approach, the paper presents analyses on the practice of ṣukūk and ṣukūk on blockchain by discussing its legal, Sharīʾah and regulatory issues. This culminates in a conceptual analysis of blockchain ṣukūk and its peculiar challenges.

Findings

This paper reveals that digitizing ṣukūk issuance through blockchain remedies certain inefficiencies associated with ṣukūk transactions. Indeed, structuring ṣukūk on a blockchain platform can increase transparency of underlying ṣukūk assets and cash flows in addition to reducing costs and the number of intermediaries in ṣukūk transactions. The paper likewise brings to light legal, regulatory, Sharīʾah and cyber risks associated with ṣukūk on blockchain that confront investors, practitioners and regulators. This calls for deeper collaboration in research among Sharīʾah scholars, lawyers, regulators and information technology experts.

Research limitations/implications

As a pioneering subject, the paper notes the prospects of blockchain ṣukūk and the current dearth of literature on it. The paper would assist relevant Islamic capital market entities and authorities to determine the potential and impact of blockchain ṣukūk in their respective businesses and the financial system.

Practical implications

Blockchain ṣukūk will assist in addressing issues inherent in classical ṣukūk and in paving the way to innovative solutions that will facilitate and enhance the quality of ṣukūk transactions. For that, ṣukūk would require appropriate regulatory technology to address its governance and regulation peculiarities.

Originality/value

Integrating ṣukūk with blockchain technology will add value to it. The paper advances the idea that blockchain ṣukūk revolutionises ṣukūk and enhances its practice against known inadequacies.

Details

ISRA International Journal of Islamic Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0128-1976

Keywords

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