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Weathering The Storm: Shariah Compliance, Digital Innovation, And Stock Performance During Covid-19

Author

Listed:
  • Mohamad Ikhsan Modjo

    (BINUS University, Indonesia)

  • Florencia Putridamni

    (BINUS University, Indonesia)

  • Ariella Shenny Lin

    (BINUS University, Indonesia)

Abstract

The COVID-19 pandemic disrupted global financial markets, highlighting the need for factors that enhance resilience. This study examines whether Shariah compliance and digital innovation, individually and together, mitigate declines in stock performance during economic downturns. Drawing on Signaling Theory and Dynamic Capabilities Theory (DCT), this study argues that Shariah compliance serves as a signal of strong governance, while digital innovation enhances adaptability. Using firm-level data from Indonesia and a difference-in-differences (DID) model, our findings suggest that both factors help firms withstand crises, with digital innovation amplifying the benefits of Shariah compliance. This study provides insights into how Islamic finance and digital transformation contribute to financial stability.

Suggested Citation

  • Mohamad Ikhsan Modjo & Florencia Putridamni & Ariella Shenny Lin, 2025. "Weathering The Storm: Shariah Compliance, Digital Innovation, And Stock Performance During Covid-19," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 11(2), pages 385-418, June.
    • Handle: RePEc:idn:jimfjn:v:11:y:2025:i:2g:p:385-418
    DOI: https://doi.org/10.21098/jimf.v11i2.2437
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    More about this item

    Keywords

    Shariah stocks; Stock performance; COVID-19; Digital transformation;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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