The Islamic Shariah Principles for Investment in Stock Market

Alam, Md. Mahmudul; Akbar, Chowdhury Shahed; Shahriar, Shawon Muhammad; Monzur-E-Elahi, Mohammad

doi:10.31235/osf.io/b7j4e

Cited by 14 publications

(18 citation statements)

References 4 publications

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“…Aside from the banking industry, mudharabah contract is also used in the stock market where shareholders or investors act as the shabibul maal, and the issuing firms act as mudharib utilizing the fund for the business purpose. Between these two parties, there is a profit and loss sharing mechanism that resembles the mudharabah contract (Alam, Akbar, Shahriar, & Elahi, 2017).…”

Section: Source Of Knowing Islamic Rural Banksmentioning

confidence: 99%

Knowledge Level and Determinants Factors in Selecting to the Islamic Rural Banks

Firmansyah¹,

Alamanda²,

Santoso³

2020

IJIBEC

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The aims of this research are fourfold. First, it aims to identify the source of knowledge of the respondents on Islamic rural banks. Second, this research aims to study the factors considered important by the respondents in selecting Islamic rural banks. Third, this research studies the level of knowledge and awareness of the respondents on the products or contracts of Islamic rural banks. Finally, this paper aims to compare the respondents’ knowledge and awareness based on gender, education level, and period of banking in Islamic rural banks. We disseminated questionnaire to 285 customers of Islamic rural banks in several cities in West Java, Indonesia. This research uses descriptive and quantitative methods using a t-test. We found that our respondents attained knowledge in Islamic rural banks in college, and the most substantial factor affecting them to choose Islamic rural banking is not sharia compliance. In fact, it is the economic factor. Qardhul Hasan, wadiah, and mudharabah are the three most popular contracts among our research respondents. Finally, the level of knowledge and awareness about these three contracts are not significantly different between male and female, between different education levels, and between the banking periods of the customers.

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Section: Source Of Knowing Islamic Rural Banksmentioning

confidence: 99%

Knowledge Level and Determinants Factors in Selecting to the Islamic Rural Banks

Firmansyah¹,

Alamanda²,

Santoso³

2020

IJIBEC

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“…Sharīʿah provides a small number of guidelines about the nature of the firm, which focuses mainly on religious values and social well-being. First of all, the main business of the company must be accepted (halal) according to Islamic principles (Alam et al, 2017). Furthermore, one of the most important principles in Islamic finance is the prohibition of riba (usury and interest), which is defined as "any predetermined or fixed return in financial transaction" (Aggarwal and Yousef, 2000).…”

Section: Qualitative and Quantitative Criteria For Sharīʿah-compliant Companiesmentioning

confidence: 99%

“…A generally accepted range for the debt is that the debt ratio must be lower than 33 per cent (Butt, 2014). In particular, The Dow Jones Islamic Market Index, the FTSE Islamic Index, the Shariah Advisory Council of Securities and the Exchange Commission in Malaysia exclude the firms in which debt to asset ratio is superior than or equal to 33 per cent (Alam et al, 2017). Furthermore, Islamic financial institutions have adopted other quantitative Sharīʿah-compliant screening criteria around the world (FTSE Shariah global equity index): cash and interest-bearing securities to total assets (interest ratio); the level of interest ratio must be lower than 33 per cent; cash and account receivable to total assets (liquidity ratio); the level of liquidity ratio must be lower than 50 per cent; and non-permissible income to total revenues (non-permissible income); the income ineligible ratio must be lower than five per cent.…”

Section: Qualitative and Quantitative Criteria For Sharīʿah-compliant Companiesmentioning

confidence: 99%

The impact of leverage on the cost of capital and market value

Battisti

Bollani

Miglietta

et al. 2020

MRR

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Purpose This paper aims to investigate the impact of leverage on the cost of capital and market value in the Indonesia Stock Exchange (IDX), where there are Sharīʿah and non-Sharīʿah compliant firms. Design/methodology/approach This study uses a mixed methods sequential exploratory design and is based on an empirical analysis undertaken with a sample of firms listed on the IDX. In particular, a qualitative analysis was conducted to identify the Sharīʿah-compliant firms and the qualitative study was designed to compare some financial elements in Sharīʿah and non-Sharīʿah compliant listed companies. The correlations among the main elements observed are considered and a principal component analysis describes the framework. Findings First, the results of the analysis show that for the Sharīʿah-compliant companies, identified as those that apply Islamic principles, the lower level of leverage that it is typical of these type of firms implies a higher cost of capital [cost of equity and weighted average cost of capital (WACC)] than non-Sharīʿah ones. Secondly, for the Sharīʿah-compliant companies, the lower level of leverage entails a higher market value measured by the multiples method (price/earning and enterprise value/operating profit) than for non-Sharīʿah ones. Originality/value This paper sheds new light on how leverage can affect the cost of capital and market value in the case of Sharīʿah and non-Sharīʿah compliant listed companies in the IDX. In particular, this research highlights the fact that Sharīʿah-compliant firms, despite having a higher WACC, create more market value compared to non-Sharīʿah compliant ones.

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“…Ng & Ariff, 2019). Islamic stocks index has trading characteristics where market participants can benefit greatly, and this index is predicted to go down or go up with a widespread (Alam et al, 2017).…”

Section: Introductionmentioning

confidence: 99%

ARCH and GARCH Models on the Indonesian Sharia Stock Index

Budiandru

2021

jakis

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Investments in Islamic stocks are in demand because of the profit-sharing system so that the company is more stable in facing uncertain global economic conditions. This study aims to analyze the volatility of the Indonesian Sharia Stock Index and the Indonesian Sharia Stock Index's potential in the future. We use daily data from 2012 to 2020 and the Autoregressive Conditionally Heteroscedasticity-Generalized Autoregressive Conditional Heteroskedasticity (ARCH-GARCH) method. The results show that the Indonesian Sharia Stock Index's volatility is influenced by the risk of the two previous periods and the return volatility in the previous period. Potential Indonesian Sharia Stock Index tends to fluctuate in return by an average of 3 percent.

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The Islamic Shariah Principles for Investment in Stock Market

Cited by 14 publications

References 4 publications

Knowledge Level and Determinants Factors in Selecting to the Islamic Rural Banks

Knowledge Level and Determinants Factors in Selecting to the Islamic Rural Banks

The impact of leverage on the cost of capital and market value

ARCH and GARCH Models on the Indonesian Sharia Stock Index

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