Islamic Finance and the Theory of Capital Structure
This paper empirically investigates firms using Islamic finance in Malaysia and Middle East countries. The comparative analysis of Islamic finance and non-Islamic finance users resulted in three major implications. First, Islamic bond issuers preferentially choose the Islamic bond issuance prior to bank borrowing and other external financing tools. Second, Islamic bond issuance is not related to the issuer’s internal funds, while Islamic bank borrowing is significantly influenced by the magnitude of a firm’s internal funds. These results suggest that Islamic bond issuers do not always choose to issue bonds based on information cost, but Islamic bank borrowers always do. Third, the Islamic bond issuance contributes to an increase in the issuer’s stock returns and total factor productivity. This empirical result suggests that Islamic bond issuance is preferred because of this unique benefit which standard external financing does not have.
|Date of creation:||02 Jan 2010|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ang, James S & Chua, Jess H & McConnell, John J, 1982. " The Administrative Costs of Corporate Bankruptcy: A Note," Journal of Finance, American Finance Association, vol. 37(1), pages 219-26, March.
- Luca Errico & Mitra Farahbaksh, 1998. "Islamic Banking: Issues in Prudential Regulations and Supervision," IMF Working Papers 98/30, International Monetary Fund.
- Graff Zivin Joshua & Small Arthur, 2005. "A Modigliani-Miller Theory of Altruistic Corporate Social Responsibility," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-21, May.
- Heinkel, Robert & Kraus, Alan & Zechner, Josef, 2001. "The Effect of Green Investment on Corporate Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(04), pages 431-449, December.
- Abbas Mirakhor & Mohsin S. Khan, 1991. "Islamic Banking," IMF Working Papers 91/88, International Monetary Fund.
- Aggarwal, Rajesh K & Yousef, Tarik, 2000. "Islamic Banks and Investment Financing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 93-120, February.
- Timur Kuran, 2004. "Why the Middle East is Economically Underdeveloped: Historical Mechanisms of Institutional Stagnation," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 71-90, Summer.
- Kuran, Timur, 2005. "The logic of financial westernization in the Middle East," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 593-615, April.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:24567. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.