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Open Access
Article
Publication date: 16 August 2022

Sri Rahayu Hijrah Hati, Muhammad Budi Prasetyo and Nur Dhani Hendranastiti

The study aims to examine the difference of financial-based brand equity of Sharia-compliant and non-Sharia-compliant companies listed in the stock market.

Abstract

Purpose

The study aims to examine the difference of financial-based brand equity of Sharia-compliant and non-Sharia-compliant companies listed in the stock market.

Design/methodology/approach

The five-year data were collected from 561 companies listed in the Indonesian stock market (349 Sharia-compliant firms and 212 non-Sharia-compliant firms).

Findings

Based on five years of observations, the study shows that Sharia-compliant companies have much higher brand equity than companies that are not Sharia-compliant. However, the study did not find consistent results when the study examined the differences between brand equity in newly listed Sharia-compliant firms in the short run (two-quarters of the observations). In other words, Sharia-compliant status positively impacted a company’s brand equity only in the long run.

Research limitations/implications

The study examines only the brand equity of Sharia- and non-Sharia-compliant companies in the Indonesian stock market.

Practical implications

The study suggests that companies should list their equity in the Islamic stock market as the empirical evidence shows that the companies listed in the Sharia index have much higher brand equity than companies listed in the non-Sharia index, although this impact can only be seen in the long run.

Originality/value

The study integrates finance and marketing perspectives, which are often disconnected in daily business. In addition, the study provides a piece of empirical evidence on the effect of financial decision to be listed in the Islamic stock market on the establishment of brand equity, which represents the long-term intangible assets of the firm in the eyes of the customers.

Details

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

Keywords

Article
Publication date: 12 July 2022

Prasojo Prasojo, Winwin Yadiati, Tettet Fitrijanti and Memed Sueb

The purpose of this study is to examine the relationship between intellectual capital, sharia governance and Islamic bank performance based on the maqasid sharia index, as…

Abstract

Purpose

The purpose of this study is to examine the relationship between intellectual capital, sharia governance and Islamic bank performance based on the maqasid sharia index, as well as the moderating effect of sharia governance on the relationship between intellectual capital and maqasid sharia index.

Design/methodology/approach

Dynamic panel regression is used with the two-step generalised method of moments with data from the Bankscope database for 2014–2018.

Findings

The results show that higher intellectual capital efficiency improves Islamic bank performance based on maqasid sharia. Larger board sizes are also found to improve Islamic bank performance. By contrast, higher sharia supervisory board quality and larger independent boards can reduce Islamic bank performance. In the moderating relationship, sharia governance is proven to moderate the relationship between intellectual capital and Islamic bank performance.

Research limitations/implications

This study used a sample that is restricted to Islamic bank and only used value-added intellectual coefficient to measure intellectual capital. Thirdly, the quality of the sharia supervisory board only involves the presence, size, expertise and doctoral qualification of the sharia supervisory board.

Originality/value

This research: analyses the relationship between intellectual capital, sharia governance and Islamic bank performance in one research framework; uses maqasid sharia index-based Islamic bank performance benchmarks; and examines the moderating effect of sharia governance on the relationship between intellectual capital and maqasid sharia index.

Details

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

Keywords

Article
Publication date: 14 July 2022

Ahmad Hambali and Desi Adhariani

This study aims to analyse whether Sharia-compliant companies have better sustainability performance, especially in the midst of the COVID-19 pandemic. The pandemic…

Abstract

Purpose

This study aims to analyse whether Sharia-compliant companies have better sustainability performance, especially in the midst of the COVID-19 pandemic. The pandemic context is worth investigating as there is a concern that companies will reduce their sustainability activities to focus more on economic recovery, thereby leading to lower sustainability performance.

Design/methodology/approach

This study uses data from companies listed on Indonesian and Malaysian stock exchanges. These two countries have experienced rapid developments in Islamic finance and possess similar criteria in assigning the Sharia compliance label to a company. The data on sustainability performance and its three dimensions (environmental, social and governance) were gathered from Refinitiv (Thomson Reuters) and analysed using panel data regression.

Findings

The results show that Sharia-compliant companies had a higher sustainability performance in all research periods, but not during the COVID-19 pandemic. This implies that the pandemic has not triggered a need for Sharia-compliant companies to improve their sustainability performance. The results can be interpreted that sustainability performance is not only at stake during the COVID-19 pandemic but it can also indicate a “business-as-usual” approach applied by companies regardless of the Sharia-compliant label.

Originality/value

Sustainability performance has been intensively investigated in prior research, but how it is related to the current health crisis and Sharia compliance has been scantily studied and becomes the originality of this research.

Details

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

Keywords

Article
Publication date: 7 June 2022

Yudho Taruno Muryanto

This article aims to explore legal challenges regarding the regulation and supervision of Islamic Fintech and to construct Sharia compliance regulations to strengthen the…

Abstract

Purpose

This article aims to explore legal challenges regarding the regulation and supervision of Islamic Fintech and to construct Sharia compliance regulations to strengthen the supervision of Islamic Fintech operation.

Design/methodology/approach

This type of research is legal research, adopting the statute approach, comparative approach, and conceptual approach. The focus of the study is Indonesia with comparative studies with Malaysia and the United Kingdom.

Findings

Malaysia, Indonesia, and the United Kingdom are all on the top five countries in the Global Islamic Fintech (GIFT) Index. The list comprises countries that are most conducive to the growth of the Islamic Fintech market and ecosystem. However, weak supervision and low Sharia compliance are still becoming prominent challenges in the implementation of Islamic Fintech, while Sharia compliance is the core principle for Islamic finance regulation. Another finding is that a good ecosystem of Islamic Fintechs needs supportive regulations and policies, a Sharia Supervisory Board, and standards of Islamic Fintech Shariah governance.

Research limitations/implications

This study examines the regulation and supervision of Islamic Fintech in Indonesia, Malaysia, and the United Kingdom countries whose Islamic Fintech industry is growing rapidly.

Practical implications

This study is a strong reference for countries with potential Islamic finance, especially when they are constructing the Sharia compliance regulations to strengthen the regulation and supervision of the Islamic finance industries.

Social implications

Sharia compliance regulations can be a subsystem in the Islamic financial ecosystem to encourage Sharia economic growth in various countries.

Originality/value

To ensure Sharia compliance, it is recommended to take some steps: (a) creating the Sharia compliance regulations; (b) creating the Sharia supervisory boards; and (c) standardizing the Sharia governance of Islamic Fintech.

Details

Journal of Financial Crime, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1359-0790

Keywords

Book part
Publication date: 1 March 2021

Siti Khomsatun, Hilda Rossieta, Fitriany Fitriany and Mustafa Edwin Nasution

The unique characteristic of Islamic bank leads in governance and disclosure. Using stakeholder, signaling, and market discipline theory, governance and adequate…

Abstract

The unique characteristic of Islamic bank leads in governance and disclosure. Using stakeholder, signaling, and market discipline theory, governance and adequate disclosure may increase bank soundness. This study aims to investigate the relationship of sharia disclosure and Sharia Supervisory Board in influencing Islamic bank soundness in the different regulatory framework of the country. Using purposive sampling, the research covered 84 Islamic banks in 16 countries during the period 2013–2015 with lag data of Islamic bank soundness. The result shows sharia disclosure influences on Islamic bank soundness for management efficiency, capital adequacy ratio, asset quality, and liquidity. The results also show that sharia disclosure mediates the indirect effect of SSB on Islamic bank soundness. The regulatory framework (sharia accounting standard and SSB regulation) shows moderating effect of regulation framework proved on the association of sharia disclosure with management efficiency, capital, and liquidity. The effect is indirectly depending on the regulatory framework for proxy management efficiency, capital, and liquidity. The implication of the research suggests that sharia disclosure could increase the market discipline mechanism of Islamic bank stream. The Islamic bank can increase the transparency using sharia disclosure as a branding for increasing public trust, even though in the deficient Islamic bank regulation countries.

Details

Recent Developments in Asian Economics International Symposia in Economic Theory and Econometrics
Type: Book
ISBN: 978-1-83867-359-8

Keywords

Open Access
Book part
Publication date: 4 May 2018

Anwar Puteh, Muhammad Rasyidin and Nurul Mawaddah

Purpose – The purpose of the research is to analyze the efficiency of Islamic banks in Indonesia. The data used in this research are panel data observed from 2012 until…

Abstract

Purpose – The purpose of the research is to analyze the efficiency of Islamic banks in Indonesia. The data used in this research are panel data observed from 2012 until 2016. The sampling of this research is conducted on five Sharia banks in Indonesia, that is, Bank Muamalat, Bank SyariahMandiri, BukopinSyariah, BRI Syariah, and Bank Mega Syariah.

Design/Methodology/Approach – The study uses a quantitative method to analyze the efficiency of Sharia banking with formulation of comparison of operating expenses to operating revenues (BOPO).

Finding – The result of this research concludes that Sharia banking in Indonesia has not been efficient during the last five years, that is, 2012–2016. This can be seen from the range of banking efficiency ratio. The average level of Islamic banking efficiency ranges between 89.73% and 94.16%. Bank Muamalat whose range is 94.16% shows the highest average efficiency ratio compared to other Sharia banks. Meanwhile, Bank Mega Syariah maintains the lowest average efficiency ratio that is 89.37%. The five Sharia banks have a high efficiency ratio of over 80%. This shows that Sharia banking in Indonesia is inefficient

Originality/Value – The bank should be able to balance between cost (cost) and revenue. Sharia banks must also be able to create good product innovation in order to increase the collection of funds from the community, such as for competitive outcomes, prizes, or other programs that raise public interest to use the services of Sharia banking.

Research Limitations/Implications – This inefficiency is due to the high bank operating costs compared to the bank’s operating income.

Details

Proceedings of MICoMS 2017
Type: Book
ISBN:

Keywords

Article
Publication date: 15 October 2021

Umi Widyastuti, Erie Febrian, Sutisna Sutisna and Tettet Fitrijanti

This study aims to determine antecedents of market discipline. A model was constructed by extending the theory of planned behavior (TPB) to explore the cognitive…

Abstract

Purpose

This study aims to determine antecedents of market discipline. A model was constructed by extending the theory of planned behavior (TPB) to explore the cognitive, psychological and social factors that influence the market discipline in the form of withdrawal behavior.

Design/methodology/approach

This study applied a quantitative approach by surveying 181 Indonesian retail investors in Sharia mutual funds, which were represented by civil servants. The samples were collected using the purposive sampling technique. This study used the partial least square–structural equation model to analyze the data.

Findings

The results revealed that the Islamic financial literacy, the attitudes toward withdrawal, the subjective norms and the perceived behavioral control had a positive significant effect on the withdrawal intention, whereas financial risk tolerance had an insignificant impact. Then, all the exogenous variables and intention to withdraw had a significant contribution in explaining market discipline. Contrary to the proposed hypothesis, the attitude toward withdrawal had a negative impact on market discipline. The structural model indicated that the TPB could be extended by adding some exogenous variables (i.e. Islamic financial literacy and financial risk tolerance) in determining the intention to withdraw and withdrawal behavior, which indicated the market discipline in Sharia mutual funds.

Research limitations/implications

This study was limited to individual investors who work as civil servants. This study did not accommodate different demographic factors such as age and gender, which influence fund withdrawal behavior.

Practical implications

The government must focus on the inclusion of market discipline in Sharia mutual funds’ regulation to encourage the risk management disclosure, specifically that related to Sharia compliance.

Originality/value

Previous studies applied a traditional finance theory to predict market discipline, but this study contributes to filling the theoretical gap by explaining the market discipline from a behavioral finance perspective that was found in Sharia mutual funds.

Details

Journal of Islamic Accounting and Business Research, vol. 13 no. 1
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 5 December 2020

Gökberk Can

Sharia compliance states that the compliant company operates not only under regulations but also to the restrictions and permission of Islam. This study aims to reveal…

Abstract

Purpose

Sharia compliance states that the compliant company operates not only under regulations but also to the restrictions and permission of Islam. This study aims to reveal whether Sharia compliance enhances the financial reporting quality.

Design/methodology/approach

The sample is constructed from 15 Muslim majority countries, 2,300 companies for the periods between 2005 and 2017 with 23,810 firm*year observations. Financial reporting quality is measured with discretionary accruals and audit aggressiveness. Discretionary accruals is the absolute of Kothari, Leone and Wasley’s (2005) “performance matched discretionary accruals model.” Audit aggressiveness is calculated with Gul, Wu and Yang’s (2013) model.

Findings

This study reveals the behavioral differences in financial reporting quality between Sharia-compliant and non-compliant companies. According to the analyzes, Sharia compliance increases the financial reporting quality by decreasing the discretionary accruals and audit aggressiveness. This result is supported by the robustness tests.

Practical implications

Sharia compliance is not limited to business activity, financial restrictions and supervisory board for Sharia-compliant companies. It also enhances the companies’ financial reporting quality. Robustness analysis also showed that the International Financial Reporting Standards (IFRS) increases the financial reporting quality by reducing discretionary accruals and audit aggressiveness.

Originality/value

This study contributes to the accounting literature by providing an insight on the use of Islamic financial instruments. The empirical results also show that the use of IFRS and Islamic financial instruments decreases the discretionary accruals and audit aggressiveness.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 14 no. 1
Type: Research Article
ISSN: 1753-8394

Keywords

Article
Publication date: 9 July 2021

Ratna Candra Sari, P.L. Rika Fatimah, Sariyatul Ilyana and Hardika Dwi Hermawan

This study aims to examine financial socialization based on augmented reality (AR) technology for elementary school students, which it is hoped will improve their sharia

Abstract

Purpose

This study aims to examine financial socialization based on augmented reality (AR) technology for elementary school students, which it is hoped will improve their sharia financial knowledge.

Design/methodology/approach

The experimental method with pre- and post-test and control groups was used to test the improvement in the young learners’ sharia financial knowledge. This study used AR for sharia financial socialization on elementary school students and focused on sharia’s basic concepts, which include earning money, balanced spending, borrowing, saving, investment, payment methods, financial technology and the concept of protection.

Findings

This study finds empirical evidence that the treatment group, who received sharia financial socialization via the AR media, increased their sharia financial knowledge to a greater extent than the control group did.

Research limitations/implications

This study provides encouraging evidence about the potential of sharia financial education for elementary school students using the appropriate learning strategies and media. The weakness in this study is that it was only carried out in one elementary school, with the children of middle- to upper-income parents. Further research should be undertaken at several schools with the children of parents with different income levels.

Practical implications

A shift in learning styles from verbal or visual to virtual encourages the use of AR-based learning media. Financial concepts can be abstract ones, and AR-based learning media is able to present intangible virtual elements so they become more concrete and tangible.

Social implications

The global COVID-19 pandemic has affected all aspects. One of the most severe and likely to be multiyear ahead is the financial aspect. Therefore, this research is expected to be a preparation for the younger generation as early as possible to strengthen social benefits in order to improve sharia financial literacy.

Originality/value

Research into the financial literacy, especially sharia financial literacy aimed at elementary school students, is still very limited. The teaching of financial literacy will be more effective if educators use the appropriate strategies and media. This study used financial socialization strategies and AR learning media that are aligned with the learning styles of young learners.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 15 no. 1
Type: Research Article
ISSN: 1753-8394

Keywords

Article
Publication date: 15 August 2016

Zakaria Boulanouar and Faisal Alqahtani

The purpose of this paper is to explore the existence of underpricing in the cooperative insurance sector in the Saudi Arabian market and to examine whether Sharia

Abstract

Purpose

The purpose of this paper is to explore the existence of underpricing in the cooperative insurance sector in the Saudi Arabian market and to examine whether Sharia compliance requirements have an impact on the level of underpricing.

Design/methodology/approach

Underpricing and the effect of Sharia compliance are analysed using a comprehensive sample of 33 insurance companies with data collected between 2007 and 2013, after taking into account market movements, as well as some factors well-known in the literature.

Findings

The authors find that underpricing not only exists but also is among the highest in the world (455 per cent), which contradicts the literature on initial public offerings (IPOs)’ pricing in highly regulated sectors. In light of one of the other findings of the authors, namely, the small number of insurance underwriters, the authors attribute these very high levels of underpricing in part to the monopsony power of insurance underwriters in Saudi Arabia. Regarding the Sharia compliance effect, they find that it does not significantly reduce the underpricing of insurance offerings. The authors interpret this as the fact that Sharia status might not be taken into account by underwriters when they price the offerings of insurance companies, due to a major drawback in the implementing regulations of cooperative insurance which have been highly criticised by practitioners.

Research limitations/implications

Future research should try to include more factors that might explain the underpricing and its determinants. Two important recommendations flowing from this study for regulatory and supervisory institutions are the need to improve disclosure and transparency conditions and to work towards reducing the monopsony power enjoyed by the underwriters. As for Sharia effect, the Saudi central bank should resolve the issue of Sharia compliance by adopting one of the Sharia-friendly models suggested by Islamic finance scholars, such as wakala or mudaraba.

Originality/value

To the best of authors’ knowledge, this paper is among the first to offer empirical evidence of the impact of Sharia compliance on the initial return of the IPOs of cooperative insurance firms.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 9 no. 3
Type: Research Article
ISSN: 1753-8394

Keywords

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