New strategies and a new paradigm for Shariah-compliant portfolio optimization

Derigs, Ulrich; Marzban, Shehab

doi:10.1016/j.jbankfin.2008.12.011

Cited by 115 publications

(71 citation statements)

References 9 publications

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“…Although an increasing body of literature empirically comments on the similarities and differences between Islamic banks and conventional banks, only a few studies compare Sukuk issuance to other financing techniques. Derigs andMarzban (2009) andJobst (2009) each analyzes and discusses the reasons for and the backdrop of Sukuk market development, but they do not conduct micro-level empirical analyses. To the best of our knowledge, only Solé (2008), Godlewski, Turk-Ariss, and Weill (2013), Alam et al (2013), and Hassan and Oseni (2014) empirically studied the Sukuk market by using issuer data.…”

Section: Literaturementioning

confidence: 99%

“…b) The increase in Islamic lending contracts has not occurred because of a preference for profit-sharing loans. Aggarwal and Tarik (2000) Theoretical and multi-country macro-economic analyses Khan and Mirakhor (1991) Khan (1986) Bashir (1983 d. Sukuk and capital markets Derigs and Marzban (2009) Multi-country macro-economic analyses a) It is possible to construct Shariah-compliant portfolios with risk-and-return profiles that are comparable to those of conventional non-constrained portfolios.…”

Section: Hypothesesmentioning

confidence: 99%

See 1 more Smart Citation

Who issues Sukuk and when?: An analysis of the determinants of Islamic bond issuance

Nagano

2016

Rev Financ Econ

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Using security issuer data from Malaysia, Indonesia, Saudi Arabia, and the United Arab Emirates from the 2001-2013 period, this study investigates how Islamic bond (Sukuk) issuers differ from conventional debt and equity issuers. An international comparative analysis of these three types of security issuers yields three key insights. First, accessibility to the Sukuk market is essential in choosing Sukuk issuance; other determinants will not promote the use of Sukuk, unless this requirement is first satisfied. Second, the low degree of financial constraints on a firm promotes Sukuk issuance, once the required condition of issuer accessibility to the Sukuk market is satisfied. Third, undervaluation of a firm in the pre-issuance period also encourages Sukuk issuance, once the issuer's Sukuk market accessibility condition is satisfied.Taken together, we conclude that Sukuk issuance is preferred along with market timing, once the pecking-order conditions of market accessibility are satisfied.JEL Classifications: G20, G21, G32 AbstractUsing security issuer data from Malaysia, Indonesia, Saudi Arabia, and the United Arab Emirates from the 2001-2013 period, this study investigates how Islamic bond (Sukuk) issuers differ from conventional debt and equity issuers. An international comparative analysis of these three types of security issuers yields three key insights. First, accessibility to the Sukuk market is essential in choosing Sukuk issuance; other determinants will not promote the use of Sukuk, unless this requirement is first satisfied. Second, the low degree of financial constraints on a firm promotes Sukuk issuance, once the required condition of issuer accessibility to the Sukuk market is satisfied. Third, undervaluation of a firm in the pre-issuance period also encourages Sukuk issuance, once the issuer's Sukuk market accessibility condition is satisfied.Taken together, we conclude that Sukuk issuance is preferred along with market timing, once the pecking-order conditions of market accessibility are satisfied.JEL Classifications: G20, G21, G32

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Section: Literaturementioning

confidence: 99%

Section: Hypothesesmentioning

confidence: 99%

Who issues Sukuk and when?: An analysis of the determinants of Islamic bond issuance

Nagano

2016

Rev Financ Econ

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“…Because of the complexity of choosing a representable activity screening, this study follows the “best of” strategy explained in Derigs and Marzban (). Under the “best of” strategy, this study prioritizes the selection of an activity screen based on the best risk–return performance of the equity screening criteria providers.…”

Section: Empirical Design Of This Studymentioning

confidence: 99%

Islamic business scorecard and the screening of Islamic businesses in a cross‐country setting

Hassan

Rashid

Saw

et al. 2019

Thunderbird Intl Bus Rev

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Screening of shari'ah compliant firms is incomplete without the inclusion of ethical and social responsibilities. The existing “activity screen” does not directly capture the ethical and social footprints of firms. The purpose of this study is to create and test an Islamic business scorecard that combines activity, ethical, and social responsibilities that Islamic businesses must comply with. This new Islamic business scorecard replaces the existing activity screens and is added to the financial screens to create an integrated business screening mechanism to identify shari'ah compliant firms. This study utilizes data from a sample of 410 shari'ah compliant companies listed with stock exchanges in Malaysia, Pakistan, and Bangladesh. Out of the five newly developed constructs of the Islamic business scorecard, the results indicate Islamic firms are less committed to social responsibilities and tend to push forward economic responsibilities that focus on profitability and growth. Of the three countries, this study reports Malaysian firms have the highest compliance scores, while Bangladesh displays characteristics of the “next‐big shari'ah destination”. Financial screens are more important than the Islamic business scorecard for firms in the construction, industrial, technology, and trading/services sectors. Because of its connection with the economic, ethical, and social dimensions, the scorecard helps to identify the true nature of shari'ah compliance as a useful decision tool for investors and policymakers.

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“…Up to now, the majority of the studies on this field have dealt with performance of Islamic products. According to the portfolio theory, if we restrict the menu of activities to be chosen, we obtain a smaller set of investment opportunities that could affect overall portfolio performance (Derigs & Marzban, 2008, 2009). Therefore, a first strand of literature has compared the performance of Islamic and conventional equity mutual funds (Ashraf, 2013;BinMahfouz & Hassan, 2013;Hayat & Kraeussl, 2011;Hoepner, Rammal, & Rezec, 2011;Merdad & Hassan, 2016); however, no overall supremacy of any of these categories is noted.…”

Section: Te Ra Tu R E Re V I Ew a N D Re S Ea R Ch Qu Esti Onmentioning

confidence: 99%

The effects of Shariah board composition on Islamic equity indices' performance

Hassan

Miglietta

Paltrinieri

et al. 2018

Business Ethics: A Eur Rev

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Based on a sample of 54 Islamic indices over the period 2007–2014, we investigate the effect of Shariah board members' educational background on Islamic indices' risk and return characteristics via the screening criteria. Using a capital asset pricing model benchmark analysis, we assess the sensitivity of Islamic indices to their conventional peers in terms of beta and derive a measure of return (Jensen's alpha). First, we observe that the higher the number of members in common among the boards, the higher the risk–return profile of Islamic indices. Second, commonalities among board members lead to standardization of the screening criteria and to similar Islamic indices' performance. Third, we show that different betas across providers depend on the screening criteria, while the economic educational background of board members affects performance in terms of Jensen's alpha. Our study aims at contributing to the governance literature related to board composition and its importance as a possible driver of performance. In addition, given the impressive growth that Islamic finance has experienced during the last decade, this topic is of great interest to the asset management industry.

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New strategies and a new paradigm for Shariah-compliant portfolio optimization

Cited by 115 publications

References 9 publications

Who issues Sukuk and when?: An analysis of the determinants of Islamic bond issuance

Who issues Sukuk and when?: An analysis of the determinants of Islamic bond issuance

Islamic business scorecard and the screening of Islamic businesses in a cross‐country setting

The effects of Shariah board composition on Islamic equity indices' performance

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