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Billions of dollars, across 131 countries, are invested in Islamic law‐compliant funds that are often promoted as consistent with the spirit and overall objectives of Islam (Maqasid Al‐Sharia), thereby indicating they are more socially responsible, less risky, and less prone to failure. The empirical results of this study indicate that Shariah‐compliant firms identified by the Dow Jones do not have higher corporate social responsibility (CSR) scores, lower risk, or lower likelihood of failure than non‐compliant firms. We address endogeneity using the instrumental variable (IV) approach and selection bias using propensity score matching (PSM). Our results are similar when using the Dow Jones Islamic Market World, the Financial Times Stock Exchange Islamic Index, and the Hong Kong and Shanghai Banking Corporation indices and when using CSR scores provided by multiple databases. We create an index to measure compliance with Islamic law that overcomes several flaws in the binary measures currently employed in the industry. This index can help Shariah‐compliant funds to fulfill their promise by constructing portfolios that are both compliant with Islamic rulings and consistent with the spirit and objectives of Islam in being more socially responsible, less risky, and less prone to failure. [ABSTRACT FROM AUTHOR]

Globally, the role of capital market is very essential. Capital market is the source of capital for a firm. According to the theory of capital structure, Pecking Order Theory, which emphasizes the hierarchy of financing, stock in capital market is the last choice for firm financing if the internal financing hasn't sufficient funds for the operational activity of the firm. The existence of the Islamic capital market is very important because of the increasing Islamic business in the world. In Indonesia and in the world in general, Islamic product is only available in the conventional capital market, so it is necessary to decide the mechanism of screening the stock in the Islamic capital market to obtain the product of Islamic capital market according to sharia compliance. This study will compare the mechanism of stock screening according to the Fatwa DSN-MUI, the Kuala Lumpur Stock Exchange Islamic Index, and the Dow Jones Islamic Market Index. This study uses qualitative method. The result of the study gives the explanation of the mechanism of stock screening in the Islamic capital market based on the Fatwa DSN-MUI, the Kuala Lumpur Stock Exchange Islamic Index, and the Dow Jones Islamic Market Index and their role for the development of the Islamic capital market. [ABSTRACT FROM AUTHOR]

This paper examines the sensitivity of the Dow Jones Islamic market index and its corresponding industry equity indices to changes in the level, slope and curvature of the U.S. term structure of interest rates over the period 1996-2015 using the quantile regression approach. The empirical results reveal that the Islamic stock market has a considerable negative exposure to interest rate risk, although a declining time pattern of interest rate sensitivity is observed. The unexpected changes in the level factor of the U.S. yield curve, closely linked to long-term interest rates, are identified as the most important interest rate factor in explaining the variability of Islamic equity returns. Furthermore, the interest rate exposure tends to be stronger during extreme bearish conditions in the stock market, possibly due to the greater pessimism and risk aversion under these market circumstances. It is also shown that Islamic equities are not different from their mainstream counterparts in terms of interest rate sensitivity, indicating that the Islamic stock market does not provide a cushion against interest rate risk. [ABSTRACT FROM AUTHOR]