With the application of regression with common effect this paper analyzed the empirical validity of two famous and formal theories (Trade off and Pecking order). We have selected four independent variables tangibility,size,profitability and growth and explored their relationships with the dependent variable leverage in textile sector companies. After proper filteration 132 firms were selected as final sample for analysis for the period of 2001-2009. Balance sheet analysis published by State Bank of Pakistan has been used for the purpose of collecting data. Among the four hypothesis,tangiblity and size of the company were supporting the trade off theory where as profitability and growth supported pecking order theory. To check the stationary of data six panel unit root tests have been applied which provided strong evidences of rejecting the unit root in the panel structure. The results of the regression showed that tangiblity is most influencial determinant in debt financing decision and positively associated with leverage which is a confirmation of hypothesized prediction of trade off theory. Size and profitability failed to support trade off theory with their negative coefficient and supported the hypothesized prediction of the Pecking order theory. Growth with its negative coefficient supported the trade off theory but the results are not realible as it was not statistically significant. Thus keeping in view the four hypothesis and based on their results there is stronger support for the Pecking order theory in textile sector of Pakistan.

Purpose This study aims to develop a Sharīʿah-compliance rating mechanism for the Islamic financial services industry (IFSI), with a special focus on banking. The banking sector is taken as the area of focus due to its leadership role in the volume of global Sharīʿah-compliant assets. Design/methodology/approach The objectives of the Islamic financial system (IFS) are selected as the basis for ratings. A range of performance indicators (leading to achievement of the objectives) is grouped into four broader categories and used in the study to allocate scores with a sum total of 100. Special considerations – including the amount of resources required in performing an activity, suitability of prevailing business conditions, the degree of compulsion/discretion in performing a task and linkage with the essence of the IFS – were taken into account in the allocation of scores. Findings This study groups multiple performance measures into four categories, including portfolio construction (deposits mechanism, participatory and asset-based modes of financing), access to finance (service to the less-privileged and sector screening), reputation (disclosures and stakeholders’ survey) and Sharīʿah governance (Sharīʿah supervision and controls, charitable operations, human resources, product development and organization). The Portfolio, Audit, Reputation and System (PARS) rating system is then developed. Practical implications A Sharīʿah-compliance rating system is helpful in measuring the progress towards goal achievement of the IFS and in gaining stakeholders’ trust. It is also important for Sharīʿah boards and regulators in policy formulation, for management in addressing weaknesses and taking corrective measures and potentially for standard-setting bodies. Originality/value This study presents a comprehensive quantitative Sharīʿah-compliance rating mechanism, taking into consideration the objectives of the IFS – equitable distribution of wealth and financial stability, in addition to Sharīʿah-compliance in operations. Development of Sharīʿah-compliance quality ratings for Islamic banking is essential to gain customers’ trust; the suggested methodology is thus a contribution to the literature on Islamic finance.

Purpose Islamic financing is based on the ideology of Islam, proposing a different economic system than capitalism. The essence of Islamic financing lies in trading of goods, provision of services and/or investment under profit and loss sharing. This study aims to examine legal forms and economic substance of the contracts used by the Islamic financial industry. Design/methodology/approach To conclude on the objectives of the study, five most widely used contracts (modes/products), including Murabaha, Ijarah, Diminishing Musharaka, Sukuk and Mudaraba (deposits), were selected to test against the theory of the Islamic financial system. Findings It is found in the process that legally (legal form) contracts/products are in line with theory; however, economic substance is not very different from conventional counter parts. Practical implications Through application of alternative calculation measures/methods and proper training of human resources, Islamic financial institutions can shift economic substance of contracts in line with the theory of Islamic finance. Originality/value Islamic finance is an emerging area, and reasonably good amount of literature is available; however, perhaps, this is the only piece of work focusing on calculation methods, contributing in economic substance of contracts, being used in modern Islamic finance in addition to legal form as per essence of Islamic financial system.

This study documents the impact of price variations in global markets, specifically oil, on stock returns at Pakistan stock exchange (PSX). We select three global markets (oil, gold and currency exchange) and two PSX indices (conventional and Islamic) for a period 2009-2020 to provide evidence. Monthly data for the selected time series is used for analysis. Analysis techniques include descriptive statistics, stationarity testing, Johansen cointegration, correlation and regression analysis. Findings suggest joint long-run co-movements of selected markets. Regression results indicate the significance of oil prices at 1% level, with positive signs, in the stock return generation process at PSX (for both indices conventional and Islamic). Other selected markets (gold and currency exchange) are although significant but at a higher degree, with negative signs. For the oil market, results confirm the demand-pull inflation hypothesis in Pakistani market. Results also confirm shifting to gold market by investors in the period of reductions in stock returns. Finally, depreciation of domestic currency discourages investors in buying stocks. We recommend investors to have an eye on oil, gold and currency markets while making investment decisions at PSX. We also recommend to policymakers to take timely actions for exchange rate stability, to avoid the outflow of capital. To the best of our knowledge, this is the only study documenting the influence of global markets on stock returns at PSX in recent years.

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