The substitution hypothesis of agency conflicts: Evidence on Shariah compliant equities

Azmi, Wajahat; Anwer, Zaheer; Mohamad, Shamsher; Shah, Mohamed Eskandar

doi:10.1016/j.gfj.2019.02.004

Cited by 14 publications

(15 citation statements)

References 30 publications

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“…diversified Â CG) have a negative and statistically significant coefficient on the financial leverage, implying that a sophisticated governance mitigates the leverage level in diversified enterprises. Another recent study conducted by Azmi et al (2019) on the US market using a data set comprising constituents of the Dow Jones Islamic Index for the period 2006-2015 articulates that better-governed firms carry less debt and encounter limited agency problems. According to Fosberg (2004), entities with dual leadership (i.e.…”

Section: Literature Reviewmentioning

confidence: 99%

Corporate governance practices and capital structure decisions: the moderating effect of gender diversity

Zaid

Wang

Abuhijleh

et al. 2020

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Purpose Motivated by the agency theory, this study aims to empirically examine the nexus between board attributes and a firm’s financing decisions of non-financial listed firms in Palestine and how the previous relationship is moderated and shaped by the level of gender diversity. Design/methodology/approach Multiple regression analysis on a panel data was used. Further, we applied three different approaches of static panel data “pooled OLS, fixed effect and random effect.” Fixed-effects estimator was selected as the optimal and most appropriate model. In addition, to control for the potential endogeneity problem and to profoundly analyze the study data, the authors perform the one-step system generalized method of moments (GMM) estimator. Dynamic panel GMM specification was superior in generating robust findings. Findings The findings clearly unveil that all explanatory variables in the study model have a significant influence on the firm’s financing decisions. Moreover, the results report that the impact of board size and board independence are more positive under conditions of a high level of gender diversity, whereas the influence of CEO duality on the firm’s leverage level turned from negative to positive. In a nutshell, gender diversity moderates the effect of board structure on a firm’s financing decisions. Research limitations/implications This study was restricted to one institutional context (Palestine); therefore, the results reflect the attributes of the Palestinian business environment. In this vein, it is possible to generate different findings in other countries, particularly in developed markets. Practical implications The findings of this study can draw responsible parties and policymakers’ attention in developing countries to introduce and contextualize new mechanisms that can lead to better monitoring process and help firms in attracting better resources and establishing an optimal capital structure. For instance, entities should mandate a minimum quota for the proportion of women incorporation in boardrooms. Originality/value This study provides empirical evidence on the moderating role of gender diversity on the effect of board structure on firm’s financing decisions, something that was predominantly neglected by the earlier studies and has not yet examined by ancestors. Thereby, to protrude nuanced understanding of this novel and unprecedented idea, this study thoroughly bridges this research gap and contributes practically and theoretically to the existing corporate governance–capital structure literature.

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Section: Literature Reviewmentioning

confidence: 99%

Corporate governance practices and capital structure decisions: the moderating effect of gender diversity

Zaid

Wang

Abuhijleh

et al. 2020

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“…Menurut Darmadji dan Fakhruddin (2006) dividen adalah pembagian dari sisa laba bersih yang diperoleh perusahaan kemudian didistribusikan kepada pemegang saham atas izin atau persetujuan dari Rapat Umum Pemegang Saham (RUPS). Menurut Farooq & Tbeur (2013) perusahaan yang mematuhi syariah tidak hanya memiliki rasio pembayaran dividen yang tinggi tetapi juga memiliki kemungkinan lebih tinggi untuk pembayaran dividen dibandingkan perusahaan konvensional, hal itu terjadi karena perusahaan yang mematuhi syariah cenderung memiliki leverage yang rendah dan piutang yang lebih rendah, begitu juga menurut Azmi et al (2019) perusahaan syariah identik dengan hutang yang lebih rendah, sehingga akan memiliki biaya keagenan yang rendah pula, dengan rendahnya biaya agensi perusahaan syariah maka dapat memberikan dividen yang lebih tinggi untuk investor.…”

Section: Dividenunclassified

Analisis Pengaruh Islamic Label Terhadap Kinerja Dan Tata Kelola Perusahaan (Studi Pada Indeks Saham Kompas 100 Periode 2015-2018)

Susanti

2021

mssb

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Penelitian ini bertujuaan untuk menganalisis pengaruh Islamic label terhadap Deviden Per Share (DPS), Earning Per Share (EPS), return dan komisaris independen perusahaan yang terdaftar pada Kompas 100 periode 2015-2018. Dari hasil pengujian hipotesis dengan menggunakan analisis regresi data panel unbalanced, diapatkan hasil bahwa DPS perusahaan berlabel Islam lebih besar dibandingkan perusahaan konvensional, sedangkan EPS dan return perusahaan syariah lebih kecil dibandingkan perusahaan konvensional, selain itu jumlah komisaris independen perusahaan berlabel Islam lebih sedikit dibandingkan perusahaan konvensional. Untuk uji signifikansi terdapat hubungan positif signifikan antara Islamic label dan tingkat DPS pada tingkat signifikansi 10%. Sedangkan untuk EPS, tingkat return saham dan jumlah komisaris independen tidak ada hubungan signifikan dengan Islamic label.

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“…Shariah-compliant firms are different in terms of their characteristic of following strict shariah screening in order to remain shariah compliant and not engage in certain activities beyond a certain threshold, such as debt (Azmi, Anwer, Mohamad, & Shah, 2019). Considering the different nature of these firms, we investigate if shariah compliance matters in the shaping the relationship between SPD and financial performance.…”

Section: Relevant Studies 21 Background Theorymentioning

confidence: 99%

“…Considering the difference in the impact for shariah compliant and non-shariah compliant firms, it can be argued that non-shariah compliant ones are missing out on the greater benefits of SPD by staying non-shariah complaint. One of possible reason for the difference in the impact might be that shariah-compliant firms have a strict screening criterion, by which they abide by certain activity thresholds, so enjoy greater benefits (Azmi et al, 2019). Furthermore, it can be argued that customers prefer shariah-compliant firms with sustainable practices.…”

Section: Shariah-compliant Vs Non-shariah Compliant Firmsmentioning

confidence: 99%

Sustainability-Disclosures and Financial Performance: Shariah Compliant vs Non-Shariah- Compliant Indonesian Firms

Khattak

Ali

Burki

2020

JIMF

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We investigate the impact of sustainability-performance disclosure (SPD) on firmperformance on a cross-industry sample of 71 firms over the period 2011-2018. Wealso compare the relationship between shariah-compliant firms (SCFs) and non-shariah-compliant firms(NSCF). To control for possible issues of unobservedheterogeneity, endogeneity and autocorrelation, we use the system generalizedmethod of moments approach. We found that disclosure of sustainability performanceincreases a firm’s financial performance. Firms which disclose information on theirsustainability practices were found to have higher earnings on assets and equity,which clearly supports the argument of information asymmetry. In the comparison ofshariah-compliant and non-shariah-compliant firms, it was found that SCFs are at anadvantage by being shariah compliant and that disclosure of sustainabilityperformance increases the financial performance of such firms, whereas for non-shariah-compliant firms, the impact was found to be negative. One of the mainfindings from the research is that while firms’ involvement in corporate sustainabilityactivities is encouraged, they also need to disclose any related information to theirstakeholders, general public to capitalise on this investment, in return for a goodreputation and consider going shariah complaint. Our study further recommends thatthe management of firms in Indonesia should focus on shariah compliance andconsider sustainability-practice and sustainability-performance disclosures with apositive mindset, recognising them as means of gaining an advantage rather than asan obligation.

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The substitution hypothesis of agency conflicts: Evidence on Shariah compliant equities

Cited by 14 publications

References 30 publications

Corporate governance practices and capital structure decisions: the moderating effect of gender diversity

Corporate governance practices and capital structure decisions: the moderating effect of gender diversity

Analisis Pengaruh Islamic Label Terhadap Kinerja Dan Tata Kelola Perusahaan (Studi Pada Indeks Saham Kompas 100 Periode 2015-2018)

Sustainability-Disclosures and Financial Performance: Shariah Compliant vs Non-Shariah- Compliant Indonesian Firms

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