Search

PurposeThe purpose of this study is to understand and evaluate the roles and functions of the Sharīʿah committee (SC) of Islamic banks (IBs) in Malaysia and to recommend a resetting of the scope of responsibilities to enable the SC to effectively respond to current market needs.Design/methodology/approachA Likert-type survey questionnaire was developed and distributed to all available SC members through e-mails and online surveys as well as self-administered questionnaires. At the end of the survey, 87 useable questionnaires were collected from 161 SC members, representing a 54% response rate.FindingsThis study finds that most SC members have the necessary Sharīʿah qualification, and they are mostly academics with doctoral degrees. However, there is a noticeable lack of diversity in the composition of experts in the committees. Respondents indicate that their main functions are to ensure Sharīʿah compliance of bank operations and product offerings. This is of course consistent with their stated functions as outlined in the Bank Negara Malaysia's Sharīʿah Governance Policy Document (BNM, 2019). The study finds that SCs are not involved in product development, nor responsible for financial performance. Respondents indicate three ways to enhance the role of SCs: improving banking knowledge of the members, more engagement with the board of directors (BoDs) and broadening the functions of SCs.Practical implicationsThis study highlights two policy implications. First, there is a strategic need for IBs to consider having a diversity of expertise in the SCs while maintaining the Sharīʿah experts as core members. Second, this study recommends a reset of the scope of duties of the SC to include three new areas: risk management, product development and financial performance.Originality/valueThis study evaluates the current functions of the SC of IBs in Malaysia and provides suggestions for improvement in the composition of the committee and in the scope of duties of SCs based on contemporary needs.

This paper aims to explore the process of digitalization of the financial services provided by Malaysian banks and FinTech companies and to address the issues and challenges they face. Both secondary and primary sources are used in this study, where the latter represented by questionnaires and in-depth interviews with the banking and FinTech practitioners. The qualitative aspects of the Analytical Network Process method are used to identify and analyze economic, regulatory, and operational issues faced by banks and FinTech institutions in the process of digitalizing financial services. The findings provide useful insights on whether the policies set by Bank Negara of Malaysia either accelerate or hinder the growth of Malaysia’s digital finance sector. The challenges faced by banks and FinTech companies, while digitalizing their financial services, are quite similar. They include the concerns of cyber security, lack of customer readiness in utilizing the financial services, particularly in rural areas, and the need for financial authorities to maintain stronger consumer and investor protection due to high pace of evolution of financial technology. It was also noted that customers have evolving expectations towards digital financial services, because they want seamless digital banking solutions to meet their daily needs. Previous studies had their focus on the benefits and impact of digital finance on financial inclusion as well as financial innovation. This research takes a different approach as it reflects on the impact of digitalization of financial services provided by banks and FinTechs through the prism of customer perspective.

Purpose This paper aims to explore the role of digital financial inclusion (DFI) in stabilizing the Islamic banking sector amidst the current COVID-19 pandemic. Design/methodology/approach This study has used the Panel-Corrected Standard Errors (PCSE), Two-Stage Panel Least Squares-Instrumental Variables (2SLS-IV) and Two-Step System Generalized Method of Moments (2SGMM) dynamic panel estimation method to investigate the DFI-Islamic banking stability nexus using an unbalanced panel data of 65 Islamic banks from six countries over the period 2011–2020. Findings The result suggests that greater implementation of DFI promotes Islamic banking stability, which reduces the default risk of the banks in the studied region. Consequently, incorporating DFI into the Islamic banking sector encourages inclusive economic growth that can keep the financial sector sustainable even in a crisis period like the current COVID-19 pandemic. Originality/value Unlike previous studies, the authors have focused mainly on DFI and the Islamic banking sector. This is one of the first to explore how DFI contribute to the stability and productivity of the Islamic banking sector during the pandemic. Also, this study provides fresh evidence on how the supply and demand side of DFI impact Islamic banking stability.

PurposeThe purpose of this study is to examine the relationship of the board and risk committee in respect of risk-taking in conventional and Islamic banks in Malaysia.Design/methodology/approachThis study uses unbalanced panel data for 15 conventional and 14 Islamic banks over the period 2007–2016. The generalised least squares random effects technique is applied.FindingsThe evidence shows that independent directors and frequency of board meetings reduce risk-taking but that the number of directors with finance and banking experience and those with multiple directorships tend to increase risk-taking. The findings also indicate that the size of the risk committee, the number of directors on the risk committee and the appointment of a designated risk officer tends to reduce risk-taking in banks. By comparing conventional and Islamic banks, the findings show that Islamic banks have lower exposure to portfolio risk but higher insolvency risk.Practical implicationsThe findings in this study suggest that the board and risk committee have an impact on bank risk-taking. The implications for management include having more independent directors, fewer directors with multiple board memberships and having an efficient risk committee in order to reduce risks. Regulators should look into the issue of multiple directorships as this is positively related to risk-taking. Islamic banks should expand their operations as our findings indicate that bigger banks are better able to manage risk.Originality/valueThis study covers bank governance and risk committee, which are crucial in influencing the risk-taking behaviour of conventional and Islamic banks.

Considering the reverberations of financial crisis of 2007–09 that the banking industry terribly witnessed, this paper aims to estimate both the non-bias-corrected and bias-corrected efficiency by employing the data envelopment analysis and Simar–Wilson double bootstrapping regression techniques over the period of 2011–2017 and see how the financial inclusion impacts on Islamic banks. This study finds that most of the countries, except some Asian and Middle-Eastern countries, have inconsistent efficiency trends in Islamic banking sector. It also shows that financial inclusion is significantly allied with Islamic banking efficiency. Eventually, the results propose that Islamic banks are still bearing the consequence of that economic recession and, therefore, bank should focus more on financial inclusion since those banks having sound and inclusive financial environment are seen enjoying higher level of financial efficiency.

The U.S. Regional Greenhouse Gas Initiative (RGGI) is a regional market-based regulatory scheme for reducing greenhouse gas emissions from the electric power sector in ten northeastern states. It promotes energy efficiency, renewable energy, direct energy bill assistance to citizens, and technological innovation. Conventionally, green innovation has been one of the most effective tools for reducing greenhouse gas emissions through energy efficiency, energy transitions, and renewable energy. Thus, this study measures the impact of the implementation of RGGI on the firms’ green innovation initiatives. We used 20 years of panel data from the Fortune 500 list of the United States' largest companies. Based on DID, a benchmark regression, the RGGI has a significant adverse effect on the green innovation of Fortune 500 companies, and we verified these findings with multiple robustness tests. As we investigated how energy-intensive industries were affected by RGGI, we found that it slowed down green innovation, but it was not statistically significant. This study provides a novel perspective on how the RGGI influences green innovation in firms and how different types of sectors respond to the policy. In terms of policy, we believe that a well-covered and differentiated legislation that fosters green innovation while being realistic about the policy's goal and the firm's environmental attitude, like emissions reduction through green innovation, is essential.

This study identifies the determinants of bank capital ratios in eight East Asian countries using unbalanced panel data of 278 banks from 2004 to 2014. The results indicate that bank capital decisions are significantly driven by management quality, liquidity, leverage and bank size, as well as bank regulations, indicating that the determinants of bank capital are consistent with past findings for US and European banks. The capital adequacy ratios in East Asia are not linked with banks’ risk appetite. Given that our results show that bank managers generally react negatively to capital requirements, capital regulations should be followed with more rigorous supervisory oversight, to reduce the adverse effects of high capital requirements on bank safety.

No microfinance institutions (MFIs) in Malaysia offer mudarabah and musharakah (M&M) as micro-equity instruments. This study looks into the possibility of introducing M&M for underprivileged women entrepreneurs in Selangor State. Hence, it assesses clients’ willingness to accept Shariah rules, religiosity, product knowledge and entrepreneurial skills. Data from 330 respondents were collected from female Muslim members of an MFI, namely Amanah Ikhtiar Malaysia (AIM). The data were analysed by using exploratory factor analysis (EFA), confirmatory factor analysis (CFA) and structural equation modelling (SEM). The findings show that women entrepreneurs prefer those Shariah principles that seem easy to comprehend and preserve their interests. They possess primary knowledge of M&M and fairly practise intrinsic and extrinsic religiosity, but lack proper entrepreneurial skills. Therefore, application of M&M would be viable if clients’ knowledge of Shariah and M&M were improved along with their religiosity and entrepreneurial skills. These findings would help include M&M within the context of microfinancing.

Waqf properties need to be perpetual, irrevocable and inalienable. Even though the social impact is the main objective of waqf creation, it cannot be denied that the economic value is important to help maintain and sustain waqf properties since getting funding for waqf property development is very difficult. Hence, State Islamic Religious Councils (henceforth referred to as the Councils) as waqf trustees are expected to operate as a social enterprise in developing its waqf land. This paper aims to investigate the perceived factors of the current waqf land development practices in each Council that contribute to the Council’s success as a social enterprise. This study employs a qualitative approach where semi-structured interviews were conducted with 22 waqf officers from 14 Councils across Malaysia. The result shows that the Councils operates as social enterprises as they are already in pursuit of the dual mission namely financial sustainability and social purpose. There are nine perceived factors of the current waqf land development practices in each Council that contribute to the Council’s success as a social enterprise: (1) various types of waqf development; (2) sustainability; (3) opportunity; (4) knowledgeable; (5) financing creativity; (6) monitoring; (7) support; (8) public involvement; and (9) human development. The Councils and its waqf land development practices fit the theoretical aspects of social enterprise since the Councils needs to generate enough income from its waqf land development to cover at least the waqf’s maintenance cost.

This study attempts to examine the predictability of Google search volume (GSV) and to construct an appropriate investor sentiment index for Islamic stock markets for seven United States (U...

Uncovered Equity Parity condition states that the foreign equity market outperformance relative to the home equity market associates with foreign exchange rate depreciation. This study examines this condition in the emerging financial markets context using bounds testing approach to the level relations. Our rigorous analysis shows an evidence opposite to the UEP prediction such that an outperformance of foreign equity market links with a foreign exchange rate appreciation. Moreover, a nonlinear model shows an asymmetry in the equity market effect on the exchange rate, both in the short run and long run.

Whether banks in a concentrated market increase their profits through monopoly pricing is a question of prime concern for antitrust policies. We explore this question by introducing the role of bank conduct into the structure–performance relationship. We apply Two-step System GMM dynamic panel model to commercial banks in the Association of South East Asian Nations over the period of 1999–2014. The results indicate that the higher profits in concentrated banking industries are partially attributable to the anti-competitive conduct of banks. These findings are robust across alternative measures of market structure and bank conduct, and different time horizons. The implications of these findings require regulators to make sure that the consolidation policy for ASEAN is achieving its purpose – i.e. financial stability – and not allowing the banks to earn monopoly rents.

Financial sector liberalization in many African countries, set in a series of financial sector reforms, aimed at developing the system. Theoretically, reforms that develop the banking sector are expected to improve banks’ performance and reduce excessive bank-risk taking by enhancing bank capital ratio in addition to maintain the stability in the system. Nonetheless, literature also shows that the health of the financial system may be at risk following a liberalization process in the form of contagion effects of financial markets integration. A recent example is the global 2007/2008 global financial crisis. Against this background, this article examines the extent to which banking sector development in selected African countries affect the commercial banks’ capitalization ratio. Employing a dynamic panel regression technique for the examination while controlling for bank-specific and macroeconomic factors over the period 2000–2014, this article finds that banking sector development in the selected countries improves bank capital ratio consistent with the aims of banking sector reforms and the maintenance of stable financial system.

The level of bank concentration has increased significantly in the Association of South East Asian Nations (ASEAN) due to structural reforms undertaken in the banking sector, raising concerns about its potential negative impact on bank performance. In this paper, we empirically test the impact of bank concentration on competition in ASEAN using several indicators. The evidence indicates that the increase in the level of concentration has reduced bank competition and this finding is robust to employing several alternative measures of concentration and competition and empirical models. We discuss the policy implications of the findings.

Banks play a crucial role in bringing stability and economic development through their expected contribution in proper financial resource mobilisation across the economy. Despite the importance, there is little focus in recent literature which provided the empirical evidence how the global financial crisis affect the bank efficiency in Bangladesh. Thus, this paper aims to examine the effect of the global financial crisis and other factors on the efficiency of Bangladesh commercial banks. By employing the Data Envelopment Analysis (DEA) method, we computed the technical efficiency of individual banks operating in the Bangladesh banking sector during 2000 to 2013. The empirical findings indicate that the Bangladesh banking sector has exhibited the highest efficiency level during 2001, while efficiency seems to be at the lowest level during 2010. The study finds that crisis along with bank size, capital adequacy ratio, return on average equity and real interest rate have a significant effect on bank efficiency in Bangladesh. In order to keep the sound financial development of Bangladesh, banks operating in the Bangladesh banking sector have to consider all the potential technologies which could improve their profit efficiency levels, since the main motive of banks is to maximise shareholders’ value or wealth through profit maximisation.

An appropriate debt maturity structure is essential for firms to enable them align asset structure to liabilities to prevent a mismatch. This study investigates the role of firm-level and institutional variables on debt maturity structure in selected African countries. Using panel generalised method of moment that addresses endogeneity problem; our findings reveal a dynamic process of adjustment to optimal debt maturity structure. Furthermore, firm-level variables (leverage, asset structure and firm size) provide support for the contracting cost, signalling and matching principle theories of debt maturity structure. Results of institutional variables suggest that better developed institutions promote long-term debt maturity structures.

Examination of optimal capital structure in financial markets with imperfections suggests that when deviations from optimal capital structure occur, adjustment costs may prevent firms from moving towards target capital structure. However, previous studies on the capital structure of non-financial firms in Nigeria did not consider these imperfections and adjustment costs. It is against this background that this study investigates the dynamic adjustment to target capital structure by non-financial firms listed on the Nigerian Stock Exchange. By utilizing a framework that provides for the determination of adjustment costs, the results reveal the existence of dynamic adjustment to optimal capital structure suggesting attempts made by the sampled firms to maximize shareholders wealth. A comparison of the adjustment costs with those of firms in more developed economies shows that Nigerian firms have higher costs of adjustment indicating that the level of development of the market is important in lowering transaction costs. In addition, tangibility of assets, non-debt tax shield, growth opportunity, firm size, profitability and inflation significantly influence Nigerian firms’ optimal capital structure.

Purpose This study aims to gain the perception of Selangor’s disadvantaged women on the Sharīʿah (Islamic law) rules on two micro-equity financing instruments, namely, muḍārabah (profit sharing) and mushārakah (profit-and-loss sharing) (M&M). Design/methodology/approach A survey was carried out in the rural area of Selangor district in Malaysia by administering a self-generated structured questionnaire. A total of 330 completed questionnaires were retrieved from the members of an Islamic microfinance institution (IsMFI), namely, Amanah Ikhtiar Malaysia (AIM). The data were analysed by using structural equation modelling. Findings The female borrowers of AIM perceive the Sharīʿah rules of M&M requiring high moral and ethical values and diligent repayment performance. They are aware of some other underlying provisions such as business liquidation, share transfer, information discloser and business termination. The overall findings of this study suggest that the perceived Sharīʿah rules are akin to those that are commonly used in general partnership businesses between Muslims. It also indicates that disadvantaged entrepreneurs would accept the rules that are easy to comprehend as well as favourable to their interests. It further suggests that respondents’ experiences of microfinance and business operation do not have a significant influence on their perception of M&M instruments. Research limitations/implications This study was limited to Selangor. So, the perception of Muslim women surveyed may not represent the views of all women in Malaysia. However, it can offer a primary understanding of the said issue. Practical implications The findings of this study can help IsMIFs take initiatives to offer M&M as micro-equity finance to poor women entrepreneurs. Originality/value So far, limited studies have been carried out on M&M-based microfinancing. This paper offers new insights presenting disadvantaged women entrepreneurs’ perception of these financing instruments.

People with HIV/AIDS (PLWHA) commonly pose problems to their family as well as to society because of their vulnerable health and economic conditions. Contrarily, PLWHA encounter social discrimination and adverse realities while finding it difficult to continue in their jobs. These complex phenomena interact to push them into a low economic status. A microfinance program can hopefully assist poor patients to cope with the negative economic consequences of this disease. But the conventional market-oriented microfinance institutions show reluctance to serve this group of people due to the possibilities of having credit risk. In this paper, we propose an alternative microfinancing technique that can provide a better economic life of the PLWHA while absorbing the credit risks. A comprehensive model is designed using specific Islamic financial instruments in conjugation with household economic portfolio theory. Critical realism method was adopted to construct this model. We concluded that the application of Islamic microfinance can enhance income of HIV patients while reducing the productivity-loss. This model can be useful to the microfinance practitioners and policymakers for addressing a different market segment, diversifying products, and formulating policy.

This study has contributed to the analysis of the Fama–French three-factor model by proving the validity of model using the newly constructed Fama–French factors from Malaysian Islamic stock market...

Emerging and frontier markets in Africa have witnessed various economic and financial reforms aimed at integrating the domestic markets into the global financial market to attract investment. Whether these reforms promote high economic growth remains inconclusive. The paper applies the pooled mean group estimation technique to empirically re-investigate the link between financial market development, global financial crisis, and economic growth in selected African economies. The results strongly support our hypotheses that stock market and banking sector development promotes economic growth in the selected countries. Moreover, financial crisis reduce the positive effects of both the stock market and banking sector developments on economic growth. The study suggests that both the banking sector and stock market are important to deliver the long-run economic growth that the African region desired. Moreover, effort should be made to enact policy measures that would ensure development of the stock market which has received inadequate attention. info:eu-repo/semantics/publishedVersion

We examine the role of bank competition for the transmission of monetary policy through the bank lending channel. We also consider the extent to which banks' characteristics – i.e. size, capitalization and liquidity – affect the banks' response to monetary policy shocks. We apply two structural and two non-structural indices to assess the level of competition. The two-step system GMM dynamic panel estimator is applied to bank level data from five ASEAN countries over the period of 1999–2014. The results from three competition measures (CR5, HHI and Lerner Index) imply that the effect of monetary policy on banks' loans reduces as the level of competition decreases. However, the results from the Boone Indicator suggest that a decrease in the level of competition strengthens the monetary policy transmission through the bank lending channel. The weakening/strengthening effect is stronger for highly capitalized, highly liquid and large banks. These findings are robust in relation to alternative measures of monetary policy and different sample periods. The use of alternative competition measures enables us to argue that based on a single measure, the implications about the role of competition can be misleading. The results of this study necessitate policy measures that can counter the adverse effects of changes in banking competition on the effectiveness of monetary policy transmission.

This paper aims to investigate whether, and to what extent, total quality management (TQM) influences bank loan quality. We propose an approach to measure TQM for evaluating this relationship. The proposed measure is the residual from the Fama–MacBeth regression based on bank efficiency proxied by the income-to-cost ratio. Our proposed TQM measure is statistically significant. We obtain data of 581 US commercial banks from the SNL Financial database for the period 1991–2013 with a total of 13,303 bank-year observations. The result shows that TQM is positively related to bank loan quality. This suggests that the implementation of better TQM can help management to monitor borrowers, improve competition and efficiency, manage good-quality loan portfolios, minimise expenses, and generate more revenues. This research has several implications for regulation, TQM implementation, and policy for the banking industry. In sum, an association between TQM and loan quality allows us to expand our knowledge of the speci...

The paper examines the impact of economic integration on the relationship between the currency and equity markets for a group of Asian emerging economies using both linear and non-linear frameworks. We first derive the dynamic conditional correlations between the two markets and then examine the impact of economic integration on their relationship. Our main results are: (i) there is a negative correlation between real exchange rate changes and equity return differentials for all countries apart from China, which becomes deeper during the GFC for some of the countries; (ii) economic integration, both real and financial, has an asymmetric impact on the relationship between the two markets both in the short-run and in the long-run; and (iii) applying a linear framework does not bring out the impact of financial integration.

This chapter provides a general discussion on the types of Sukuk, particularly their classification and structures in the Islamic Capital Market (ICM). In the ICM, Sukuk can be classified into two different categories. The first classification is based on the type of structure such as asset-based or asset-backed, whereas the second classification is based on specific Shariah contracts such as murabahah and ijarah. Both structures are used in many Sukuk issuances in the ICM, such as corporate issuances or sovereign issuances in different currency denominations. This chapter covers several important facets of Sukuk, including types of Sukuk such as asset-based and asset-backed, classification of Sukuk based on Shariah contracts such as Sukuk mudarabah and Sukuk musharakah, and many others.

This chapter provides an introduction to Sukuk in the Islamic capital market (ICM). Sukuk is defined as certificates of equal value representing ownership over an underlying asset. Sukuk represents common shares and rights over the underlying assets or over usufruct (benefits derived from an underlying asset) and services. It is regarded as one of the most important financial instruments in Islamic finance and is a leading product in the ICM. It has its own features and specifications that distinguish it from other financial instruments in conventional finance such as bonds.

This chapter focuses on the major principles, terms, and conditions governing Ijarah sukuk issuance as practiced in the Islamic capital market. In practice, Sukuk has some specific Shariah and legal clauses in its legal documentation that should be observed to reflect the nature of the underlying principles and contract. These legal and Shariah aspects are documented in the Sukuk issuance under the principles, terms, and conditions. This chapter covers the description of the Islamic structure of the issuance, the important Shariah aspects of the structure of Ijarah sukuk, the important Shariah features in the legal documents, and other related terms in the Ijarah sukuk issuance.

Sukuk is an emerging financial sector, a significant and important investment class in Islamic finance.

This chapter focuses on case studies related to Ijarah sukuk. It discusses some cases pertaining to Ijarah sukuk and forward lease Sukuk by providing their structures and key features. This chapter covers case studies of Ijarah sukuk, including Malaysian global Sukuk, Pakistan jjatah Sukuk, and Saxony Anhal Sukuk. The case studies of forward lease Sukuk include Zamzam tower Sukuk intifa’ and Tabreed Sukuk.

This chapter focuses on the theory of ijarah, securitization, and the concept of the financial certificate. It provides a foundation of Ijarah sukuk, where the theory of ijarah is discussed and illustrated along with its types, principles, and Shariah rulings. The chapter covers important issues such as Ijarah sukuk with its different portfolios, securitization and financial certificate, and the tradability of Ijarah sukuk in the secondary market.

This chapter examines the forward lease/ijarah Sukuk, in particular its issues, challenges, and Shariah compliance, with the objective of formulating an opinion from the relevant experts on different matters pertaining to forward lease Sukuk. This chapter covers Shariah issues in forward lease Sukuk including the principles, terms, and conditions (PTC) in Sukuk issuance, the legal documentations and transaction documents in Sukuk issuance, the structure of Sukuk issuance, trading issues in Sukuk, legal issues in forward Ijarah sukuk, industry challenges of forward Sukuk ijarah, industry acceptance of forward Ijarah sukuk, and the future direction of Sukuk issuance based on forward lease Sukuk.

This chapter provides an overview about the Islamic capital market (ICM), which is regarded as a vibrant market segment in Islamic finance. The ICM is a marketplace that is free from non-Shariah compliant activities. There are many important activities and instruments offered in the ICM such as Sukuk, shares, RETS, ETF, and others. The ICM plays an important role in the development of finance and the economy as it opens up opportunities for investment and fund raising. This chapter offers a general introduction to the ICM and covers some of its very important aspects. It provides a general overview of the Sukuk market in Islamic finance, examines the growth of the Sukuk industry and its challenges in the current global financial market, presents an analysis of Sukuk in the ICM, and discusses key milestones in the Sukuk Market.

This chapter emphasizes the forward lease Sukuk by discussing its concept, issuance, structuring process, and overall governing rules to provide clear guidance on the issuance of forward lease Sukuk. This chapter covers topics such as the concept of the forward lease, general rules of forward leasing, istisna as an underlying contract in a forward lease portfolio, issuance of forward lease Sukuk, parties in Sukuk securitization, illustration of the process and phases of Sukuk issuance, and issues in forward Ijarah sukuk such as the steps involved in structuring forward Ijarah sukuk.

This chapter is about Sukuk in the Islamic capital market (ICM). Sukuk is regarded as an important instrument in the ICM. Moreover, Sukuk is regarded as a unique structure with specific features that distinguish it from other types of instruments such as bonds, shares, and securitization. These features bring along with them various benefits to the issuers and investors as well. There are some Shariah rules and principles that should be observed in dealing with Sukuk in the stage of issuance as well as when trading in the secondary market to ensure its Shariah-compliant status. This chapter covers important aspects of Sukuk such as its definition and concept, characteristics of investment Sukuk, the Shariah foundation of Sukuk, and risk factors in Sukuk.

We examined the relationship between blockholder ownership and firm performance in the context of high concentrated ownership in Malaysia coupled with weak regulatory framework. Blockholder ownership is used as monitoring device to verify the significant role in managerial decisions accordance with maximizing shareholders’ wealth. Consequently, blockholders may have personal incentive to the expropriation of minority shareholders’ wealth by exercising their corporate control. We found a positive significant relationship with small effect of beta coefficients by both market and accounting based measurements. The positive relationship of blockholders as institutions is the conformity of monitoring hypothesis. The results indicate a very week monitoring impact of blockholders on executives’ decisions that improve the firm performance by reducing the agency costs. Additionally, the significant low positive effect of profit volatility is representing the efficacy of blockholders until a certain level.

The non-existence of commercially available Islamic Equity Style Indices from index providers such as MSCI especially on small value and small growth stocks motivates us to construct our new indices. Firstly, various index construction methods are compared. Secondly, this paper describes in detail the process of index construction and finally, the new indices are tested using out-of-sample forecast and trading strategies. Notably, our results show Large Growth (LG) and Large Value (LV) indices have more efficacy compared to Small Growth (SG) and Small Value (SV) stocks. From the perspective of Islamic financial market, the creation of Islamic equity style index enables new strategies which focus on size, value, and smart beta. In addition, the out-of-sample VAR forecast indicates that LG and LV indices are the best candidates for creating a new benchmark for portfolio diversification. Furthermore, by applying simple trading strategies and selecting Islamic value and small market capitalization stocks, our evidence shows that Islamic equity style indices have benefits for investors and fund managers. To the best of authors' knowledge, this paper is the first attempt to create non-commercially available Islamic equity style indices.

In spite of the fact that shareholders exercise their options when it is in the money, s eparation of ownership and control creates the necessity of verifying the adoption of corporate governance mechanism, such as Executive Stock Option Scheme (ESOs). This study verifies the relationship between Executive Stock Option (ESO) exercise and firm performance to explore the exercise pattern of Malaysian executives whether there is any differences in trading option. We found a significant positive relationship between ESO exercise and firm performance for both market and accounting based performance measures using data on ESO exercising from 201 non-financial companies. Panel data analysis of fixed effect estimation revealed the pattern that Malaysian executives exercise their options immediately after they are granted; suggesting intended behavior of adopting ESOs.

Investors of initial public offers (IPOs) rely on the prospectus for importantinformation about the company. But the motivation of the issuers (originalshareholders) for going public is unknown and hidden from the investingpublic, making the IPO investment a risky venture. Based on the SignallingTheory, we postulate that the public issues (PI) and offer for sale (OFS)ratios to contain properties to signal the intention of the issuers at time oflisting. Our samples are collected from the Bursa Malaysia from 2002 to2008 and the performances are tracked till 2011. The regression results areconsistent with the Signalling Theory which stipulates that when issuerssell down their stakes, it sends a gloomy signal, even though the offer ofOFS does not cause any dilution to company’s value. In addition, smallcompanies with high OFS ratio record weaker long-run performance thanlarge companies.