Pub Date : 2022-12-21DOI: 10.1108/imefm-12-2021-0478
Hamzeh Hosseinpour, A. Khodamipour, O. Pourheidari
Purpose This study aims to investigate the relationship between return and liquidity risk and the impact of the prospect theory value (PTV) as a moderator variable on this relationship. Design/methodology/approach The statistical population of this study is the companies listed on the Tehran Stock Exchange during the years 2006–2019. In this research, the portfolio construction method and alpha analysis of the factor models and the cross-sectional regression of Fama and Macbeth have been used to analyze the data. Findings The results obtained through the portfolio construction method and the cross-sectional regression of Fama and Macbeth show that there is no significant relationship between return and Amihud (2002) criterion (ILLIQ) as liquidity risk. The PTV also does not affect this relationship, but there is a positive and significant relationship between returns and the turnover ratio (TOR) as liquidity risk. In other words, the lower the TOR (higher liquidity risk), the lower the return. On the other hand, the results showed that the PTV affects this relationship. Originality/value To the best of the authors’ knowledge, this study is the first to examine the effect of the PTV on the relationship between return and liquidity risk. It is expected that the results of this study can help investors explain returns better through a deeper understanding of the behavior of investors and their decision-making methods. In other words, by examining the PTV as a proxy for behavioral dimension, we can understand that the relationship between return and liquidity risk can be affected by other dimensions like PTV, so when evaluating risk and return, other influential factors should also be considered.
{"title":"The impact of the prospect theory value on the relationship between liquidity risk and returns","authors":"Hamzeh Hosseinpour, A. Khodamipour, O. Pourheidari","doi":"10.1108/imefm-12-2021-0478","DOIUrl":"https://doi.org/10.1108/imefm-12-2021-0478","url":null,"abstract":"\u0000Purpose\u0000This study aims to investigate the relationship between return and liquidity risk and the impact of the prospect theory value (PTV) as a moderator variable on this relationship.\u0000\u0000\u0000Design/methodology/approach\u0000The statistical population of this study is the companies listed on the Tehran Stock Exchange during the years 2006–2019. In this research, the portfolio construction method and alpha analysis of the factor models and the cross-sectional regression of Fama and Macbeth have been used to analyze the data.\u0000\u0000\u0000Findings\u0000The results obtained through the portfolio construction method and the cross-sectional regression of Fama and Macbeth show that there is no significant relationship between return and Amihud (2002) criterion (ILLIQ) as liquidity risk. The PTV also does not affect this relationship, but there is a positive and significant relationship between returns and the turnover ratio (TOR) as liquidity risk. In other words, the lower the TOR (higher liquidity risk), the lower the return. On the other hand, the results showed that the PTV affects this relationship.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this study is the first to examine the effect of the PTV on the relationship between return and liquidity risk. It is expected that the results of this study can help investors explain returns better through a deeper understanding of the behavior of investors and their decision-making methods. In other words, by examining the PTV as a proxy for behavioral dimension, we can understand that the relationship between return and liquidity risk can be affected by other dimensions like PTV, so when evaluating risk and return, other influential factors should also be considered.\u0000","PeriodicalId":47091,"journal":{"name":"International Journal of Islamic and Middle Eastern Finance and Management","volume":" ","pages":""},"PeriodicalIF":3.0,"publicationDate":"2022-12-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43611512","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-12-20DOI: 10.1108/imefm-04-2022-0144
Efstathios Polyzos, Aristeidis Samitas, K. Syriopoulos
Purpose This paper models the benefits of Islamic banking on the efficiency of the banking sector and on societal happiness. This paper aims to examine how the adoption of Islamic banking to various degrees affects economics outcomes. Design/methodology/approach This study uses machine-learning tools to build a happiness function and integrate it in an agent-based model to test for the direct and indirect welfare effects of implementing Islamic banking principles. Findings This study shows that even though Islamic banking systems tend to reduce economic activity, financial stability and societal happiness is improved. Additionally, a banking sector using Islamic principles across all its members is better equipped to handle banking crises because contagion to both economic activity and societal welfare is greatly reduced. At the same time, adoption of the profit-and-loss sharing (PLS) paradigm by banks may also slow down economic growth. Research limitations/implications The findings extend existing literature on the advantages of Islamic banking, by quantifying the welfare benefits of the PLS paradigm on happiness and financial stability. Originality/value To the best of the authors’ knowledge, this paper is the first to combine agent-based modelling with machine learning tools to examine the benefits of the Islamic banking model on financial stability, social welfare and unemployment.
{"title":"Islamic banking, efficiency and societal welfare: a machine-learning, agent-based study","authors":"Efstathios Polyzos, Aristeidis Samitas, K. Syriopoulos","doi":"10.1108/imefm-04-2022-0144","DOIUrl":"https://doi.org/10.1108/imefm-04-2022-0144","url":null,"abstract":"\u0000Purpose\u0000This paper models the benefits of Islamic banking on the efficiency of the banking sector and on societal happiness. This paper aims to examine how the adoption of Islamic banking to various degrees affects economics outcomes.\u0000\u0000\u0000Design/methodology/approach\u0000This study uses machine-learning tools to build a happiness function and integrate it in an agent-based model to test for the direct and indirect welfare effects of implementing Islamic banking principles.\u0000\u0000\u0000Findings\u0000This study shows that even though Islamic banking systems tend to reduce economic activity, financial stability and societal happiness is improved. Additionally, a banking sector using Islamic principles across all its members is better equipped to handle banking crises because contagion to both economic activity and societal welfare is greatly reduced. At the same time, adoption of the profit-and-loss sharing (PLS) paradigm by banks may also slow down economic growth.\u0000\u0000\u0000Research limitations/implications\u0000The findings extend existing literature on the advantages of Islamic banking, by quantifying the welfare benefits of the PLS paradigm on happiness and financial stability.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this paper is the first to combine agent-based modelling with machine learning tools to examine the benefits of the Islamic banking model on financial stability, social welfare and unemployment.\u0000","PeriodicalId":47091,"journal":{"name":"International Journal of Islamic and Middle Eastern Finance and Management","volume":" ","pages":""},"PeriodicalIF":3.0,"publicationDate":"2022-12-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47860774","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-12-19DOI: 10.1108/imefm-01-2022-0034
Anwar Bin Allah Pitchay, R. Sukmana, R. Ratnasari, Mohamad Isa Abd Jalil
Purpose This study aims to examine the determinants of motivation that influences Malaysian and Indonesian millennials to contribute cash waqf. Design/methodology/approach The present study used self-determination theory and 423 respondents, of which 205 respondents are from Malaysia and 218 from Indonesia. The study developed a self-administrative questionnaire, and it is distributed through an online survey method, and the data are analysed using SmartPLS partial least squares analysis. Findings The results show that perceived donor effectiveness and moral obligation factors influence both Malaysians and Indonesian millennials to make cash waqf contributions. Meanwhile, the face concern factor did not significantly affect millennials in Malaysia and Indonesia to contribute cash waqf. Furthermore, the sense of self-worth factor appears to significantly influence only Indonesian millennials but not Malaysian millennials. Research limitations/implications The research findings have significant theoretical and practical ramifications. Firstly, while face concern has a positive effect on millennials’ willingness to contribute cash to waqf, it is not statistically significant in Muslim populations. This implies that to persuade millennials to make cash waqf contributions, the face concern argument should be avoided. Originality/value The comparative study between Malaysia and Indonesia adds new value to this study. These two Muslim majority countries have similar attributes in terms of religion, demography and race background. Furthermore, the focus of this study, which targets units of analysis from millennials, has received very little attention in the literature related to cash waqf.
{"title":"A study of cash waqf contribution between millennials of Malaysia and Indonesia","authors":"Anwar Bin Allah Pitchay, R. Sukmana, R. Ratnasari, Mohamad Isa Abd Jalil","doi":"10.1108/imefm-01-2022-0034","DOIUrl":"https://doi.org/10.1108/imefm-01-2022-0034","url":null,"abstract":"\u0000Purpose\u0000This study aims to examine the determinants of motivation that influences Malaysian and Indonesian millennials to contribute cash waqf.\u0000\u0000\u0000Design/methodology/approach\u0000The present study used self-determination theory and 423 respondents, of which 205 respondents are from Malaysia and 218 from Indonesia. The study developed a self-administrative questionnaire, and it is distributed through an online survey method, and the data are analysed using SmartPLS partial least squares analysis.\u0000\u0000\u0000Findings\u0000The results show that perceived donor effectiveness and moral obligation factors influence both Malaysians and Indonesian millennials to make cash waqf contributions. Meanwhile, the face concern factor did not significantly affect millennials in Malaysia and Indonesia to contribute cash waqf. Furthermore, the sense of self-worth factor appears to significantly influence only Indonesian millennials but not Malaysian millennials.\u0000\u0000\u0000Research limitations/implications\u0000The research findings have significant theoretical and practical ramifications. Firstly, while face concern has a positive effect on millennials’ willingness to contribute cash to waqf, it is not statistically significant in Muslim populations. This implies that to persuade millennials to make cash waqf contributions, the face concern argument should be avoided.\u0000\u0000\u0000Originality/value\u0000The comparative study between Malaysia and Indonesia adds new value to this study. These two Muslim majority countries have similar attributes in terms of religion, demography and race background. Furthermore, the focus of this study, which targets units of analysis from millennials, has received very little attention in the literature related to cash waqf.\u0000","PeriodicalId":47091,"journal":{"name":"International Journal of Islamic and Middle Eastern Finance and Management","volume":" ","pages":""},"PeriodicalIF":3.0,"publicationDate":"2022-12-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42914938","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-12-07DOI: 10.1108/imefm-01-2022-0024
Syed Mabruk Billah, Thien Hai Nguyen, Md Iftekhar Hasan Chowdhury
Purpose This study aims to contribute by expanding the existing literature on Sukuk return and volatility and exploring the implications of the Sukuk-exchange rate interactions. Design/methodology/approach This study examines the dynamic interactions of Sukuk with exchange rate in 15 countries, employing the Wavelet approach that considers both time and investment horizons. Findings The results reveal significant evolving coherence of Sukuk return and volatility with the underlying exchange rate. The relationship is more potent than what this study witnesses in their counterpart bond market. For Sukuk returns, the coherence is negative, whereas it is positive for volatility. Notably, the coherence is strong in the medium to long term and intensifies during extreme economic episodes, especially during the COVID-19 pandemic. These findings are further validated by comparing firm-level matched data for Sukuk and conventional bond. Originality/value To the best of the authors’ knowledge, this is the first study that reports the dynamic relationship of Sukuk return and volatility with the underlying exchange rate in 15 countries. Collectively, this study unites valuable insights for faith-based active Islamic investors and cross-border portfolio managers.
{"title":"Sukuk and bond dynamics in relation to exchange rate","authors":"Syed Mabruk Billah, Thien Hai Nguyen, Md Iftekhar Hasan Chowdhury","doi":"10.1108/imefm-01-2022-0024","DOIUrl":"https://doi.org/10.1108/imefm-01-2022-0024","url":null,"abstract":"\u0000Purpose\u0000This study aims to contribute by expanding the existing literature on Sukuk return and volatility and exploring the implications of the Sukuk-exchange rate interactions.\u0000\u0000\u0000Design/methodology/approach\u0000This study examines the dynamic interactions of Sukuk with exchange rate in 15 countries, employing the Wavelet approach that considers both time and investment horizons.\u0000\u0000\u0000Findings\u0000The results reveal significant evolving coherence of Sukuk return and volatility with the underlying exchange rate. The relationship is more potent than what this study witnesses in their counterpart bond market. For Sukuk returns, the coherence is negative, whereas it is positive for volatility. Notably, the coherence is strong in the medium to long term and intensifies during extreme economic episodes, especially during the COVID-19 pandemic. These findings are further validated by comparing firm-level matched data for Sukuk and conventional bond.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this is the first study that reports the dynamic relationship of Sukuk return and volatility with the underlying exchange rate in 15 countries. Collectively, this study unites valuable insights for faith-based active Islamic investors and cross-border portfolio managers.\u0000","PeriodicalId":47091,"journal":{"name":"International Journal of Islamic and Middle Eastern Finance and Management","volume":" ","pages":""},"PeriodicalIF":3.0,"publicationDate":"2022-12-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44747518","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-12-01DOI: 10.1108/imefm-01-2022-0041
Muhammad Wajid Raza, Bahrawar Said, A. Elshahat
Purpose This study aims to provide a comparative insight into the level of informational efficiency and irregularities of Shariah-compliant stocks and conventional stocks in three emerging markets, namely, China, Malaysia and Pakistan. The empirical evidence is provided for pre-crisis and crisis periods caused by the Covid-19 pandemic. Design/methodology/approach Informational efficiency is measured using the variance ratio (VR) Test developed by Kim (2006). The Approximate Entropy (ApEn) Metrics is used to investigate the level of irregularities in stock prices caused by the pandemic. Findings All the three emerging markets in the sample are not immune to the crisis caused by Covid-19 pandemic. The level of informational efficiency of both the Shariah-compliant and conventional stock is affected by the crisis. However, the former exhibits relatively high level of informational efficiency and stability in returns as compared to more volatility of conventional stocks. Practical implications This study provides market agents and policy makers with a robust assessment of the impact of the Covid-19 pandemic on informational efficiency of Shariah-compliant and conventional stocks. Relatively high informational efficiency of Shariah-compliant stocks indicates that they are more transparent and that investors can trust the Shariah-compliant stocks more. This higher level of transparency and trust leads to more steady returns and lower levels of risk even during turbulent time like Covid-19. Investors can gain superior returns by conducting fundamental analysis and investing in index funds. Originality/value To the best of the authors’ knowledge, this is the first study that highlights the difference in informational efficiency of conventional stocks and Shariah-compliant stocks in the crisis period caused by Covid-19. Unlike previous studies, this study uses firm level data which enables firm-wise assessment of informational efficiency.
{"title":"Covid-19 and informational efficiency in Asian emerging markets: a comparative study of conventional and Shariah-compliant stocks","authors":"Muhammad Wajid Raza, Bahrawar Said, A. Elshahat","doi":"10.1108/imefm-01-2022-0041","DOIUrl":"https://doi.org/10.1108/imefm-01-2022-0041","url":null,"abstract":"\u0000Purpose\u0000This study aims to provide a comparative insight into the level of informational efficiency and irregularities of Shariah-compliant stocks and conventional stocks in three emerging markets, namely, China, Malaysia and Pakistan. The empirical evidence is provided for pre-crisis and crisis periods caused by the Covid-19 pandemic.\u0000\u0000\u0000Design/methodology/approach\u0000Informational efficiency is measured using the variance ratio (VR) Test developed by Kim (2006). The Approximate Entropy (ApEn) Metrics is used to investigate the level of irregularities in stock prices caused by the pandemic.\u0000\u0000\u0000Findings\u0000All the three emerging markets in the sample are not immune to the crisis caused by Covid-19 pandemic. The level of informational efficiency of both the Shariah-compliant and conventional stock is affected by the crisis. However, the former exhibits relatively high level of informational efficiency and stability in returns as compared to more volatility of conventional stocks.\u0000\u0000\u0000Practical implications\u0000This study provides market agents and policy makers with a robust assessment of the impact of the Covid-19 pandemic on informational efficiency of Shariah-compliant and conventional stocks. Relatively high informational efficiency of Shariah-compliant stocks indicates that they are more transparent and that investors can trust the Shariah-compliant stocks more. This higher level of transparency and trust leads to more steady returns and lower levels of risk even during turbulent time like Covid-19. Investors can gain superior returns by conducting fundamental analysis and investing in index funds.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this is the first study that highlights the difference in informational efficiency of conventional stocks and Shariah-compliant stocks in the crisis period caused by Covid-19. Unlike previous studies, this study uses firm level data which enables firm-wise assessment of informational efficiency.\u0000","PeriodicalId":47091,"journal":{"name":"International Journal of Islamic and Middle Eastern Finance and Management","volume":" ","pages":""},"PeriodicalIF":3.0,"publicationDate":"2022-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47096682","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-11-24DOI: 10.1108/imefm-12-2021-0496
Yasushi Suzuki, Mohammad Dulal Miah
Purpose There is a growing debate as to how Islamic financial institutions can increase the expansion of profit and loss sharing (PLS) finance instead of widely practiced markup finance. This paper aims to seek to argue that protecting lenders right is to be ensured if we expect to see the rise of PLS finance of Islamic banks. Design/methodology/approach The paper draws upon the theorical contribution of Toshihiko Izutsu, who shows the derivation of the modern term Islam from its pre-Islamic root of hilm. Izutsu argues that a halim (Muslim or mu’min) possesses power and becomes altruist for fellow Muslim. This research takes this view to illustrate that Islamic lenders should be bestowed with economic and financial power for the expansion of PLS finance. Findings The authors show that Islamic financial system does not furnish required institutions conducive for expansion of PLS finance. The authors further argue that the practice of PLS should be based on an effective power retained by the lender to discipline the borrower, which is currently lacking in a typical PLS contract. Practical implications The retention of the power by the lender does not necessarily breach maqasid al-shari’ah, so far as the power is managed upon the concept of hilm. This philosophical speculation, in the authors’ view, would contribute to bridge a gap between Islamic pragmatists and perfectionists’ view toward expansion of PLS finance. Originality/value Although Izutsu’s explanation provides an important tool to argue that the altruistic behaver of halim can encourage the supply of participatory finance, this provision has not been adequately argued in the literature.
{"title":"Lender’s position in the profit and loss sharing Islamic finance: an analytical perspective of Izutsu’s hypotheses on “Islam” and “Hilm”","authors":"Yasushi Suzuki, Mohammad Dulal Miah","doi":"10.1108/imefm-12-2021-0496","DOIUrl":"https://doi.org/10.1108/imefm-12-2021-0496","url":null,"abstract":"\u0000Purpose\u0000There is a growing debate as to how Islamic financial institutions can increase the expansion of profit and loss sharing (PLS) finance instead of widely practiced markup finance. This paper aims to seek to argue that protecting lenders right is to be ensured if we expect to see the rise of PLS finance of Islamic banks.\u0000\u0000\u0000Design/methodology/approach\u0000The paper draws upon the theorical contribution of Toshihiko Izutsu, who shows the derivation of the modern term Islam from its pre-Islamic root of hilm. Izutsu argues that a halim (Muslim or mu’min) possesses power and becomes altruist for fellow Muslim. This research takes this view to illustrate that Islamic lenders should be bestowed with economic and financial power for the expansion of PLS finance.\u0000\u0000\u0000Findings\u0000The authors show that Islamic financial system does not furnish required institutions conducive for expansion of PLS finance. The authors further argue that the practice of PLS should be based on an effective power retained by the lender to discipline the borrower, which is currently lacking in a typical PLS contract.\u0000\u0000\u0000Practical implications\u0000The retention of the power by the lender does not necessarily breach maqasid al-shari’ah, so far as the power is managed upon the concept of hilm. This philosophical speculation, in the authors’ view, would contribute to bridge a gap between Islamic pragmatists and perfectionists’ view toward expansion of PLS finance.\u0000\u0000\u0000Originality/value\u0000Although Izutsu’s explanation provides an important tool to argue that the altruistic behaver of halim can encourage the supply of participatory finance, this provision has not been adequately argued in the literature.\u0000","PeriodicalId":47091,"journal":{"name":"International Journal of Islamic and Middle Eastern Finance and Management","volume":" ","pages":""},"PeriodicalIF":3.0,"publicationDate":"2022-11-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45473858","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-11-10DOI: 10.1108/imefm-02-2022-0050
Mohamad Mehdi Mojahedi Moakhar, Mahmoud Esavi, Amir Khademalizadeh, F. Tari
Purpose The purpose of this paper is organized as follows. Section 2 reviews the literature on the subject matter, focusing on western economic literature and the Islamic economic paradigm, including the Quran, Sunnah, jurisprudence and Islamic philosophy thinking, to illustrate the origins of the Islamic approach to monetary systems. The money interest rate and its studies are explained, and the role of money and credit in the production function is considered. Then, it is shown that money maintains the demand for money in the overlapping generation model, as well as the consumption behavior of households. It is followed by an explanation of general Pareto optimality and the role of the money interest rate in inefficiency and nonoptimality for households and firms. Finally, Section 4 concludes the paper. Design/methodology/approach This paper studies the effects of money issuance and bank creation on Pareto optimality. In explaining the origins of the Islamic approach to monetary systems, the literature review, it focuses on western economics’ literature and Islamic economics paradigms such as the Quran, sunnah, jurisprudence and Islamic philosophy thinking. In modeling section, the authors show how banks’ fractional reserve credit is profitable. The authors also examine how the introduction of the money interest rate can change the Pareto optimality. In this regard, the comparison between two situations, namely, financing by the stock of money and borrowing in the credit market, indicates that welfare is reduced by the creation system and is inefficient (or nonoptimal). The result is that no money and no credits are created. The provision of this system compensates money by increasing the real money supply or deflation. To ensure Pareto optimality, it has been proven in the field of microfoundation that there should be no fixed money contracts and no money interest rates. It is necessary that the interest rate on consumption credit is zero or Qarz-al-Hasna is broken. Moreover, profit sharing is offered in the production sector. Findings As a result, the authors proved mathematically that the money interest rate must be zero to ensure productivity and Pareto optimality. On the other hand, the introduction of money or credit through loanable money leads to inefficiency, both in production and households and in the general equilibrium. The inflation generated by the credit system stimulates the change in the price level and perpetuates this inefficiency. Thus, if the authors want to return to the optimality condition, the interest rate on consumption credit must be zero or Qarz-al-Hasna is breached. However, the behavior of the fractional banking system and the credit mechanism teaches us that the money interest rate is an integral part of credit and loanable funds. Thus, the elimination of the money interest rate from the banking system without bank creation is implausible. Finally, to ensure Pareto optimality, it has been mathematically pro
{"title":"Providing an Islamic approach of monetary systems","authors":"Mohamad Mehdi Mojahedi Moakhar, Mahmoud Esavi, Amir Khademalizadeh, F. Tari","doi":"10.1108/imefm-02-2022-0050","DOIUrl":"https://doi.org/10.1108/imefm-02-2022-0050","url":null,"abstract":"\u0000Purpose\u0000The purpose of this paper is organized as follows. Section 2 reviews the literature on the subject matter, focusing on western economic literature and the Islamic economic paradigm, including the Quran, Sunnah, jurisprudence and Islamic philosophy thinking, to illustrate the origins of the Islamic approach to monetary systems. The money interest rate and its studies are explained, and the role of money and credit in the production function is considered. Then, it is shown that money maintains the demand for money in the overlapping generation model, as well as the consumption behavior of households. It is followed by an explanation of general Pareto optimality and the role of the money interest rate in inefficiency and nonoptimality for households and firms. Finally, Section 4 concludes the paper.\u0000\u0000\u0000Design/methodology/approach\u0000This paper studies the effects of money issuance and bank creation on Pareto optimality. In explaining the origins of the Islamic approach to monetary systems, the literature review, it focuses on western economics’ literature and Islamic economics paradigms such as the Quran, sunnah, jurisprudence and Islamic philosophy thinking. In modeling section, the authors show how banks’ fractional reserve credit is profitable. The authors also examine how the introduction of the money interest rate can change the Pareto optimality. In this regard, the comparison between two situations, namely, financing by the stock of money and borrowing in the credit market, indicates that welfare is reduced by the creation system and is inefficient (or nonoptimal). The result is that no money and no credits are created. The provision of this system compensates money by increasing the real money supply or deflation. To ensure Pareto optimality, it has been proven in the field of microfoundation that there should be no fixed money contracts and no money interest rates. It is necessary that the interest rate on consumption credit is zero or Qarz-al-Hasna is broken. Moreover, profit sharing is offered in the production sector.\u0000\u0000\u0000Findings\u0000As a result, the authors proved mathematically that the money interest rate must be zero to ensure productivity and Pareto optimality. On the other hand, the introduction of money or credit through loanable money leads to inefficiency, both in production and households and in the general equilibrium. The inflation generated by the credit system stimulates the change in the price level and perpetuates this inefficiency. Thus, if the authors want to return to the optimality condition, the interest rate on consumption credit must be zero or Qarz-al-Hasna is breached. However, the behavior of the fractional banking system and the credit mechanism teaches us that the money interest rate is an integral part of credit and loanable funds. Thus, the elimination of the money interest rate from the banking system without bank creation is implausible. Finally, to ensure Pareto optimality, it has been mathematically pro","PeriodicalId":47091,"journal":{"name":"International Journal of Islamic and Middle Eastern Finance and Management","volume":" ","pages":""},"PeriodicalIF":3.0,"publicationDate":"2022-11-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43217359","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-11-09DOI: 10.1108/imefm-05-2021-0184
M. Kamaruddin, S. Auzair
Purpose This study aims to examine the role of financial management practices, which consist of financial disclosure, internal control, financial planning and budgeting and financial performance on Islamic social enterprises’ (ISEs) accountability. Design/methodology/approach Questionnaires were administered to financial officers of 102 Malaysian ISEs. Findings were analysed using Smart-PLS to examine the relationships between financial management practices and accountability. Findings Results of this study indicate a direct relationship exists between internal control and accountability. Relationships between other financial management practices and accountability are indirect through internal control. Hence, the data demonstrates that internal control has a mediating role on other financial management practices, which are financial disclosure and financial performance management with the accountability of ISEs. Research limitations/implications This study has implicated the significant role of financial management practices in ISEs in the pursuance of their accountability especially internal control to achieve public trust. Practical implications Appropriate financial management practices, especially internal control, are essential for the ISEs to achieve good accountability. Originality/value This study contributes to the field of management and social accounting by providing empirical evidence on ISE practices specifically on financial management practices and accountability. This framework thus presents among the early attempts in studying accountability issues in ISEs.
{"title":"The impact of financial management practices on accountability of Islamic social enterprise (ISE)","authors":"M. Kamaruddin, S. Auzair","doi":"10.1108/imefm-05-2021-0184","DOIUrl":"https://doi.org/10.1108/imefm-05-2021-0184","url":null,"abstract":"\u0000Purpose\u0000This study aims to examine the role of financial management practices, which consist of financial disclosure, internal control, financial planning and budgeting and financial performance on Islamic social enterprises’ (ISEs) accountability.\u0000\u0000\u0000Design/methodology/approach\u0000Questionnaires were administered to financial officers of 102 Malaysian ISEs. Findings were analysed using Smart-PLS to examine the relationships between financial management practices and accountability.\u0000\u0000\u0000Findings\u0000Results of this study indicate a direct relationship exists between internal control and accountability. Relationships between other financial management practices and accountability are indirect through internal control. Hence, the data demonstrates that internal control has a mediating role on other financial management practices, which are financial disclosure and financial performance management with the accountability of ISEs.\u0000\u0000\u0000Research limitations/implications\u0000This study has implicated the significant role of financial management practices in ISEs in the pursuance of their accountability especially internal control to achieve public trust.\u0000\u0000\u0000Practical implications\u0000Appropriate financial management practices, especially internal control, are essential for the ISEs to achieve good accountability.\u0000\u0000\u0000Originality/value\u0000This study contributes to the field of management and social accounting by providing empirical evidence on ISE practices specifically on financial management practices and accountability. This framework thus presents among the early attempts in studying accountability issues in ISEs.\u0000","PeriodicalId":47091,"journal":{"name":"International Journal of Islamic and Middle Eastern Finance and Management","volume":" ","pages":""},"PeriodicalIF":3.0,"publicationDate":"2022-11-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44711020","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-11-08DOI: 10.1108/imefm-03-2021-0107
Jingya Li, Ming-Hua Liu, Keshab Shrestha
Purpose The paper aims to examine whether the daily conventional money market overnight rate influences the monthly investment rate of Islamic deposits in Malaysia. The traditional approach, which averages the high-frequency data to match the low-frequency data, results in information loss for the high-frequency data. Design/methodology/approach The paper uses the mixed data sampling (MIDAS) model to study the relationship between Islamic banking and conventional banking. The Malaysian data are used for the analysis as Malaysia has one of the most developed Islamic financial industries in the world, and it is well-known for its dual banking system. Findings The evidence shows that the conventional overnight rate has a positive effect on the Islamic deposit rate. The results are consistent for Islamic deposit rates with different maturities. The positive aggregate effect holds when the lag length of the daily conventional overnight rate goes up to 90 days. Additional evidence shows that the daily conventional overnight rate has a similar effect on the conventional deposit rate. Originality/value This paper documents that the relationship between Islamic banking and conventional banking is not monotonous. When high-frequency data is averaged with low-frequency data, the non-linear relationship will be masked. It highlights the importance of using high-frequency data to get a detailed picture.
{"title":"Does the conventional money market overnight rate influence the investment rate of Islamic deposits? Evidence from Malaysia","authors":"Jingya Li, Ming-Hua Liu, Keshab Shrestha","doi":"10.1108/imefm-03-2021-0107","DOIUrl":"https://doi.org/10.1108/imefm-03-2021-0107","url":null,"abstract":"\u0000Purpose\u0000The paper aims to examine whether the daily conventional money market overnight rate influences the monthly investment rate of Islamic deposits in Malaysia. The traditional approach, which averages the high-frequency data to match the low-frequency data, results in information loss for the high-frequency data.\u0000\u0000\u0000Design/methodology/approach\u0000The paper uses the mixed data sampling (MIDAS) model to study the relationship between Islamic banking and conventional banking. The Malaysian data are used for the analysis as Malaysia has one of the most developed Islamic financial industries in the world, and it is well-known for its dual banking system.\u0000\u0000\u0000Findings\u0000The evidence shows that the conventional overnight rate has a positive effect on the Islamic deposit rate. The results are consistent for Islamic deposit rates with different maturities. The positive aggregate effect holds when the lag length of the daily conventional overnight rate goes up to 90 days. Additional evidence shows that the daily conventional overnight rate has a similar effect on the conventional deposit rate.\u0000\u0000\u0000Originality/value\u0000This paper documents that the relationship between Islamic banking and conventional banking is not monotonous. When high-frequency data is averaged with low-frequency data, the non-linear relationship will be masked. It highlights the importance of using high-frequency data to get a detailed picture.\u0000","PeriodicalId":47091,"journal":{"name":"International Journal of Islamic and Middle Eastern Finance and Management","volume":" ","pages":""},"PeriodicalIF":3.0,"publicationDate":"2022-11-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45570547","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-11-07DOI: 10.1108/imefm-02-2021-0068
K. Abdo, A. Noman, M. Hanifa
Purpose This study aims to address how Islamic banks (IBs) and conventional banks (CBs) manage their liquidity and their speed of adjusting liquidity holdings both in the short- and long term. Design/methodology/approach This study uses the partial adjustment model (PAM) on a sample of 445 banks from 17 Organisation of Islamic Cooperation countries over the period 2010–2018. Findings Results reveal that despite IBs’ placement of higher short-term liquidity buffer, they experience lower net stable fund ratio (NSFR) in the long term, relative to CBs. This study’s results also reveal that IBs enjoy higher and lower speed of adjustment (SOA) for NSFR in the long- and short term, respectively. Furthermore, the results suggest that bank-specific and macroeconomic factors weaken the liquidity SOA. Practical implications This study sheds light on the importance of the adjusting speed of bank liquidity in a bid to provide regulators with insights for enhancing liquidity holdings and emphasising the regulation of banks’ reaction pace to attain the target buffers. Originality/value This study estimates the liquidity adjustment speed of IBs and CBs by providing a comprehensive discussion and empirical evidence across countries. To the best of the authors’ knowledge, this study is the first to use PAM for the assessment of liquidity holdings in IBs and the first to examine SOA of short-term liquidity holdings in the banking sector.
{"title":"Exploring the dynamics of bank liquidity holding in Islamic and conventional banks","authors":"K. Abdo, A. Noman, M. Hanifa","doi":"10.1108/imefm-02-2021-0068","DOIUrl":"https://doi.org/10.1108/imefm-02-2021-0068","url":null,"abstract":"\u0000Purpose\u0000This study aims to address how Islamic banks (IBs) and conventional banks (CBs) manage their liquidity and their speed of adjusting liquidity holdings both in the short- and long term.\u0000\u0000\u0000Design/methodology/approach\u0000This study uses the partial adjustment model (PAM) on a sample of 445 banks from 17 Organisation of Islamic Cooperation countries over the period 2010–2018.\u0000\u0000\u0000Findings\u0000Results reveal that despite IBs’ placement of higher short-term liquidity buffer, they experience lower net stable fund ratio (NSFR) in the long term, relative to CBs. This study’s results also reveal that IBs enjoy higher and lower speed of adjustment (SOA) for NSFR in the long- and short term, respectively. Furthermore, the results suggest that bank-specific and macroeconomic factors weaken the liquidity SOA.\u0000\u0000\u0000Practical implications\u0000This study sheds light on the importance of the adjusting speed of bank liquidity in a bid to provide regulators with insights for enhancing liquidity holdings and emphasising the regulation of banks’ reaction pace to attain the target buffers.\u0000\u0000\u0000Originality/value\u0000This study estimates the liquidity adjustment speed of IBs and CBs by providing a comprehensive discussion and empirical evidence across countries. To the best of the authors’ knowledge, this study is the first to use PAM for the assessment of liquidity holdings in IBs and the first to examine SOA of short-term liquidity holdings in the banking sector.\u0000","PeriodicalId":47091,"journal":{"name":"International Journal of Islamic and Middle Eastern Finance and Management","volume":" ","pages":""},"PeriodicalIF":3.0,"publicationDate":"2022-11-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47115276","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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