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Debt Maturity and Shari'ah Compliance: Evidence from Malaysian Panel Data

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  • Hafezali Iqbal Hussain
  • Mohd Farid Shamsudin
  • Shahrullizuannizam Salehuddin
  • Noor H. Jabarullah

Abstract

This paper investigates the effect of firm-specific characteristics on debt maturity in Malaysia.We examine the impact of Shari'ah compliance on debt maturity structure by grouping companies based on compliance status as governed by the Securities Commission of Malaysia over the sample period of 2007 to 2016.The results indicate that Shari'ah compliant firms tend to have longer debt maturity structure indicating that the nature of compliance determines the maturity structure of companies in Malaysia as managers of these firms tend to focus on mitigating liquidity risks potentially faced. In addition, Shari'ah compliant firms also tend to have lower bankruptcy costs.Contrary to their non-compliant counterparts, managers of Shari'ah compliant firms tend to change debt maturity structure as a signaling tool whilst opting for longer structures in periods of positive share price performance. We also find that Shar'iah compliance has no impact on firms' strategy of matching debt to asset maturity structure.

Suggested Citation

  • Hafezali Iqbal Hussain & Mohd Farid Shamsudin & Shahrullizuannizam Salehuddin & Noor H. Jabarullah, 2018. "Debt Maturity and Shari'ah Compliance: Evidence from Malaysian Panel Data," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 176-186.
    • Handle: RePEc:ers:journl:v:xx:y:2017:i:3b:p:176-186
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    References listed on IDEAS

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    Cited by:

    1. Umi Widyastuti & Erie Febrian & Sutisna Sutisna & Tettet Fitrijanti, 2020. "Sharia Compliance in Sharia Mutual Funds: A Qualitative Approach," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 19-27.
    2. Md. Kausar Alama & Suhaimi Ab. Rahmanb & Oli Ahad Thakurc & Md Abdul Bashird & and Sharif Hosene, 2020. "The Reasons Behind the Absence of a Comprehensive Shariah Governance Framework of Islamic Banks in Bangladesh," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 134-145.

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    More about this item

    Keywords

    Debt maturity; capital structure; Islamic Finance; Islamic capital markets; Shari'ah compliance; Malaysian firms. JEL code: G32; D53.;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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