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Islam stresses on the practice of transparency and sufficient disclosure particularly when it concerns the ethical identity of Islamic institutions. This is to make sure that the activities conducted in business adhere to Shari’ah principles. The purpose of this paper is to examine the impact of Shari’ah-compliant status on the accuracy of initial public offering (IPO) earnings forecasts and to investigate the effect of the existence of Muslim directors on IPO companies’ board of directors on the accuracy of earnings forecasts.

This study makes use of absolute forecast error as a proxy for earnings forecast accuracy. As obtained from the list of Shari’ah-compliant securities established by the Shari’ah Advisory Council of the Malaysian Securities Commission, the study sample comprised 190 Shari’ah-compliant and non-compliant IPOs. The collected data were analyzed through univariate analysis and ordinary least squares regression.

The initial findings show that during the study period, the earnings forecasts of Malaysian IPOs are accurate to some level, although such level is still unsatisfactory. The findings also showed that Shari’ah-compliant status and Muslim directorship do not positively affect the accuracy of IPO earnings forecasts.

The findings of the study provide some implications for regulators, financial analysts, investors and users of financial statements, particularly those desirous of investing in Islamic capital market.

The present study provides a new and far-reaching contribution into the debate about the earnings forecasts disclosure in the context of Islamic ethical perspective. In addition, this study is considered as the first study to extend IPO literature by examining the impact of Shari’ah-compliant status and Muslim directorship on the accuracy of management earnings forecasts disclosed in the IPO prospectus.

The purpose of this paper is to examine the role of Shari’ah compliant sustainable investing in the light of the credit crisis and catastrophic climate change.

The paper discusses that the climate change, natural resource shortages, fuel crisis and global financial crisis, etc. will not go away just because there is a recession. In this regard, Shari’ah compliant finance has a broader responsibility to consider societal goals and should be preparing for the post‐credit crunch world. The paper evaluates the performance of Shari’ah compliant sustainable funds using the traditional measures of performance in relation to risk‐adjusted benchmarks to see if there is any ethical effect.

The paper advocates that preventing future market meltdowns and avoiding catastrophic climate change requires a new era of longterism in Shari’ah compliant sustainable investing. The study assesses the performance of the Shari’ah compliant sustainable investing. The result shows that Shari’ah compliant funds outperformed the conventional benchmark and therefore, the challenge for Shari’ah compliant sustainable investing is not to become like conventional investing but, rather, to replace.

Shari’ah compliant sustainable finance is a recent phenomena and therefore, rigorous analytical predication of Shari’ah compliant sustainable investing variables are at present not possible using evolutionary and complex system approaches; however, such system can be fruitfully studied in future through simulation methods and certain types of econometric modeling when the long‐term data will be made available.

As the credit crunch has evolved into a full‐blown economic crisis, many have turned to the Shari’ah compliant finance to provide a route map out of recession. With an increasing number of conventional banks and corporations struggling to find funds to support their businesses, Shari’ah compliant financial institutions represent a potential solution to bridge the liquidity gap in the global markets.

Shari’ah compliance has been a subject of debate to academics, Islamic scholars and practitioners since its inception in 1983. Besides a wide range of publications in Shari’ah compliance, only a few studies have examined Shari’ah-compliant risks especially among the Islamic banks. This paper aims to investigate the factors of Shari’ah-compliant risks in Shari’ah compliance under the Shirkah-ul-milk (hire purchase) in Bangladesh.

The investigation of Shari’ah compliant risks from both bankers and clients were gained via a structured questionnaire to acquire a better understanding of Islamic banking practices in Bangladesh. In analyzing the data, two empirical tests were used to draw inferences on Shari’ah-compliant risks–Shari’ah compliance relationship: the measurement model, a diagnostic test, was used to justify the reliability and validity of constructs, and the partial least squares structural equation modeling was applied to examine the hypotheses on the existent links between Shari’ah-compliant risks and Shari’ah compliance under Shirkahul-milk.

Unlike previous studies, the empirical evidence provides the pertinent attributes of Shari’ah-compliant risks, which are more significant in avoidance of the compliance of Shari’ah laws in banking operations. Such Shari’ah-compliant risks are significantly raised by various comprehensive, operational, environmental and distributional risks in banking that have failed to address fairness, justice and economic well-being at the transactional level.

A new empirical evidence focusing on the propagation of Shari’ah-compliant risks is preferred for effective Shari’ah compliance in operations as being an original structure of Islamic banks.

Shari’ah provides the basic tenets of the Islamic finance industry and advocates banks to share their profits and losses with investors. But what it means for a firm to be “Shari’ah-compliant” and what form of connections it can have, even in theory, to either the firm’s value or profitability is still an untapped question. This study tries to answer this question. This study aims to find the impact of Shari’ah compliance on firm performance. The results obtained would be useful in helping investors, regulators, companies, government, academicians and practitioners in their decision-making process as to ensure better economic and business gains, both locally and globally.

Panel data on 634 Shari’ah-compliant firms have been used in this study for the period of 2000–2014.

The results indicate that Shari’ah compliance adds to the value of firms as firms perform transactions according to Shari’ah while avoiding non-permissible activities.

This study adds value to the existing literature by showing the statistical results for the impact of Shari’ah compliance on the performance of the listed firms on Bursa Malaysia.

This study aims to understand and document the impact of market-based – market returns and momentum – as well as firm-specific – size, book-to-market (B/M) ratio, price-to-earnings ratio (PER) and cash flow (CF) – factors on pricing of Shari’ah-compliant securities as explanation of variations in stock returns in an emerging market – Pakistan’s Karachi Stock Exchange.

Initially, the authors test Fama and French (FF) three-factor model – market risk premium, size and B/M – followed by modified FF model by including additional risk factors (PER, CF and momentum) over a 10-year period (2001-2010).

Our results support superiority of FF three-factor model over single-factor capital asset pricing model. However, addition of further risk factors – including PER, CF and momentum – improves explanatory power of the model, as well as refines the selection of risk factors. In this study, CF, B/M and momentum factors remain insignificant. Traditional B/M factor in FF model is replaced by PER.

Based on the modified FF model, the authors propose a stock valuation model for Shari’ah-compliant securities consisting of three factors: market returns, size and earnings, which explains 76per cent variations in cross sectional stock returns.

To the best of the authors’ knowledge, this is the first study (which combines market-based as well as fundamental factors) on pricing of Islamic securities and identification of risk factors in an emerging market – Karachi Stock Exchange.

This paper aims to review the Shari’ah investment screening methodologies of 34 prominent global Islamic finance users, including index providers, Shari’ah service providers, Islamic banks, a regulator, an association body and fund managers.

A comparative analysis is performed to highlight the variances of the Shari’ah-compliant methods and principles practiced by these renowned institutions with the latest compiled data.

The two sets of business screens and financial screens are profiled separately to clearly examine the similarities and differences between the different methodologies. Some of these practitioners are more specific in their listing of Shari’ah-impermissible activities, while some are more general in allowing more businesses to be included as permissible. The majority of these users practice a two-tier method of screening: qualitative and quantitative. Under quantitative screen, the range of allowable threshold ratios on non-permissible criteria differs slightly between them.

With the wide divergence in screening methodologies applied by practitioners, there is a general consensus in the acceptance of compliant assets from various countries and practice. Standardization is, therefore, seen as a need not only to make understanding of Shari’ah investments clear to investors but also to discourage misunderstandings between scholars and investors.

The suggestion, therefore, is to set globally acceptable universal Shari’ah standard methodologies which are applicable by the world Islamic financial market. These standards which are relevant and logical to global ethical investing would further stimulate investments in Islamic finance.

With Shari’ah-compliant asset growing exponentially relative to the world’s financial assets, it is alleged that greater harmonization of the global screening methods would prevent misunderstanding and provide a clearer insight on Shari’ah investing, which could further accelerate growth of the Islamic finance sector worldwide.

To provide a more transparent regulatory environment and build local and regional regulatory framework through establishment of standards, there should be more consistency with minimum barriers that prevent the industry from achieving its full potential. The paper also contributes to existing literature by documenting and analyzing the qualitative and quantitative screening procedures as practiced by a comprehensive set of global Islamic finance users. It is, therefore, important to share this knowledge as an effort toward greater understanding and harmonization of the practices at the global level to accelerate growth in the industry.

This paper aims to propose two benchmarks “Shari’ah-compliant” benchmark and “Shari’ah-based” “raf’ al-haraj” (the removal of hardship) benchmark. The former benchmark can be applied to ensure that a transaction brings “profits on sales” and not “profits on loan”, and the latter benchmark should be addressed to ensure that a transaction does not exploit the customers of Islamic banks.

The authors draw upon the theory of institutional economics, in particular, instrumental and procedural rationality, to argue that the believers can pay their best effort as an exercise of ijtihad to understand and incarnate the logic and rationales implicit in the Qur’anic text.

Currently, there is no benchmark that determines the profit ceiling on murabaha. The authors suggest two types of “gray-zones” – the “Shari’ah-compliant but less contributing to the removal of hardship” and the “controversial on compliance but contributing to the removal of hardship in borrowers” to use as a benchmark in endorsing less shariah-compliant Islamic products.

There is no benchmark or a clear-cut demarcation that can be used to endorse less Shari’ah-compliant Islamic finance. Thus, Shari’ah-compliant’ benchmark and “Shari’ah-based” “raf’ al- haraj” benchmarks can be used to guide whether a financial transaction is acceptable or not. This guideline can be of huge practical relevance for Islamic finance.

There is no sensible study that offers such guidelines that can be used to demarcate whether a particular financial transaction, which has no clear-cut fatwa, is acceptable or not. Hence, the current research is novel and contributes to the existing literature of Islamic finance.

Most conventional financial products currently on offer to Muslims in the Indian market are incompatible with Islamic religious principles; there is a recognized demand for alternatives within this niche community. India has the third largest Muslim population in the world – 155,477,386 in 2011. The purpose of this paper is to present the status of marketing activities of Shari'ah‐based investments and a comprehensive analysis of avenues for Islamic investments in India.

In India, Islamic investment is gathering pace as Muslims in the country are becoming more vocal in their demands for greater self expression. Hence, there is a great potential in India itself. Even if a small percentage of this population can be pressured to invest in the Islamic investments, the amount of money that can be brought into the system could be enormous.

The findings reveal the emergence of Islamic investment opportunities on Shari'ah‐based investments in India. This paper also provides suggestions for enhancement of Islamic investment opportunities in India.

With a sound economic base and with hundreds of companies complying with Shari'ah norms, India offers a huge opportunity for Islamic equity investment. If performance as a parameter is considered, it is observed that Shari'ah‐compliant investments, being low in debt and having sound fundamental principles, tend to perform better, hence large non‐Muslim investors should take the benefit of these socially responsible and above par performing Islamic investments.

Drawing upon underinvestment theory and clientele effect hypothesis, this paper aims to examine the effects of foreign currency (forex) exposure and Shari’ah-compliant status on firms’ financial hedging strategy.

Based on data of 250 nonfinancial firms listed on Bursa Malaysia from 2010 to 2018 (2,250 firm-year observations), the authors test the impact of forex exposure based on a vector of foreign-denominated cash flows (FCF) indicators and firms’ Sharīʿah-compliant status on two proxies of financial hedging decisions, namely, the ratio of the notional value of currency derivatives to total assets and a binomial measure of hedging status. The hedging decision models are estimated using panel logistic regression and system generalized method of moments.

The results indicate significant positive effects of the forex exposure indicators on firms’ propensity to hedge. However, the impact of forex exposure is most prevalent via total FCF. The results also reveal significant positive effects of Sharīʿah-compliant status on firms’ propensity to hedge but its negative impacts on the value of currency derivatives they use. The results suggest that Sharīʿah-compliant firms refrain from engaging in currency derivatives to avoid riba’ and subsequently subdue the clientele effect. However, when the forex exposure reaches higher levels, engagement in currency derivatives becomes a matter of tentative necessity (dharurat).

This study relies exclusively on the disclosure of foreign currency risk and management data in the annual reports of listed companies. Consequently, this limits the sample size to only those nonfinancial listed companies with complete data for the study period. Also, since none of the companies reports using Sharīʿah-compliant derivatives, the authors thus assume that they use derivative instruments that tolerate “riba.”

Given the significance of forex exposure on hedging decisions, the accounting profession must strictly adopt FRS 7 and FRS 139 for all listed firms to avoid market scrutiny and sustain their clientele. The results also call for the Islamic market regulators to include mandatory disclosure of conventional currency derivatives in screening firms for clearly prohibited activities to help enhance the credibility of its Islamic financial market.

Due to difficulty accessing relevant cash flow data, the study is among the few studies that measure forex exposure using FCF and test more proxy indicators. This study is perhaps the first to examine the Shari’ah perspective on currency derivatives in corporate forex risk management.

The purpose of this paper is to examine the current legal framework for payment system in international Islamic trade finance vis‐à‐vis the new regime introduced by the Uniform Customs and Practice for Documentary Credits (UCP) 600 as well as the Sharī'ah Standard on Documentary Credits issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Sharī'ah Resolutions of selected Sharī'ah Boards of Islamic financial institutions.

A partial comparison of both the UCP 600 and the Sharī'ah framework for documentary credit is given through the content analysis of relevant sources.

The AAOIFI Sharī'ah Standard on Documentary Credits, as well as other applicable Sharī'ah resolutions of Islamic financial institutions, does provide a good framework for a Sharī'ah‐compliant documentary credit system, which is unique to trade in Islamic finance products, but there is scope for further improvement, taking into consideration the two possibilities proposed in the available literature on the subject – harmonization or bifurcation of rules. The UCP 600 also allows for the exclusion or modification of the rules to suit the specific needs of the Islamic finance industry.

This study focuses only on UCP 600 and the Sharī'ah framework on Documentary Credits, though bearing mind that there are other frameworks for documentary credit systems such as the International Standby Practices (ISP98) and letters of credit issued under Article 5 of the New York Uniform Commercial Code.

Islamic financial institutions should implement the provisions of the AAOIFI Sharī'ah standard on documentary credits but may require a different framework for international trade financing involving both Islamic banks and conventional banks.

Though few studies have been conducted on Sharī'ah issues regarding the application of the documentary credits, this seems to be the first time where a more proactive step is taken to propose two different frameworks for transactions involving Sharī'ah compliant financing.