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I analyze the competitive conditions prevailing in Islamic and conventional global banking markets, and investigate the possible differences in profitability between these markets, using a sample of banks across 13 countries during 2000-2006. The results suggest that Islamic banks allocate a greater share of their assets to financing activities compared to conventional banks, and they are also better capitalized. Different computed measures of competition indicate that Islamic banking is less competitive compared to conventional banking.A second-stage analysis shows that profitability significantly increases with market power, but this does not warrant higher profitability levels for Islamic banks.

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Sukuk, the shari'a-compliant alternative mode of financing to conventional bonds, have expanded considerably over the last decade. We analyze the stock market reaction to two key features of this financial instrument: sukuk type and characteristics of the shari'a scholar certifying the issue. We use the event study methodology to measure abnormal returns for a sample of 131 sukuk from eight countries over the period 2006-2013 and find that Ijara sukuk structures exert a positive influence on the stock price of the issuing firm. We observe a similar positive impact from shari'a scholar reputation and proximity to issuer. Overall our results support the hypotheses that the type of sukuk and the choice of scholars hired to certify these securities matter for the market valuation of the issuing company. JEL Classification Numbers: G14, P51

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Manuscript typeEmpiricalResearch Question/IssueThis paper analyzes the importance of two aspects of the legal system in shaping firm leverage and debt maturity structure across developing countries.Research Findings/InsightsUsing a larger number of developing countries compared to prior research, four main findings are obtained. First, whereas corruption increases firm debt financing, its effect is moderated when considering the impact of stronger laws. Second, the common versus civil law distinction does matter for firm financing in developing countries, but in the opposite direction documented for developed countries. Third, less corruption combined with stronger laws increases reliance on long‐term debt. Finally, by listing on a developed exchange abroad, firms in developing countries are able to raise equity and extend the maturity of their debt.Theoretical/Academic ImplicationsThe findings on the relative importance of the legal system for firm financing decisions in developing countries do not necessarily agree with prior findings for developed countries. Future research focusing exclusively on developing countries may be warranted to better understand the drivers of private sector‐led growth in these economies.Practitioner/Policy ImplicationsThis study reinforces the importance of strengthening public governance and laws as well as deepening capital markets in developing countries to improve financing conditions.