nep-isf New Economics Papers
on Islamic Finance
Issue of 2019‒09‒09
five papers chosen by

  1. The Impact of Brexit on Islamic Stock Markets Employing MGARCH-DCC and Wavelet Correlation Analysis By Cikiryel, Burak; Masih, Mansur
  2. Sukuk Market Development and Islamic Banks’ Capital Ratios By Houcem Smaou; Hatem Ghouma
  3. Regulation and ownership effect on banks performance: New Evidence from the MENA region By Miroslav Mateev
  4. The persistence of global terrorism By Simplice A. Asongu
  5. Thank You, Infidels! Social Welfare and Islamic State Recruitment By Moamen Gouda; Marcus Marktanner

  1. By: Cikiryel, Burak; Masih, Mansur
    Abstract: Recent literature attract the attention to the issue of whether heterogeneity in stock holding periods has an impact on resulting investor exposures. In this research, we aim to study co-movement dynamics of Islamic equity returns to explain international portfolio diversification opportunities for investors having heterogeneous stock holding periods in the context of Brexit. We employ three recent appropriate methodologies: MGARCH-DCC, Continuous Wavelet Transforms (CWT), and Maximum Overlap Discrete Wavelet Transform (MODWT). The unique contribution of this research is that it is the first study investigating the Brexit effect on Islamic stocks. It would guide Shari’ah investors in their diversification strategies. The results tend to shed light on the effective portfolio diversification benefits in light of shock (Brexit) between UK Islamic stock index and other selected indices varying from country to country depending on investment horizons. This critically confirms the significance of heterogeneity in investment horizons and provides significant implications for portfolio diversification strategies.
    Keywords: Brexit, Islamic stock markets, MGARCH-DCC, CWT, MODWT
    JEL: C58 G11 G15
    Date: 2017–12–15
  2. By: Houcem Smaou (College of Business and Economics, Qatar University); Hatem Ghouma (Gerald Schwartz School of Business, St. Francis Xavier University)
    Abstract: This paper investigates the impact of Sukuk market development on Islamic banks’ capital ratios using a sample comprising 230 Islamic banks spanning the period 2005-2014. We characterize Islamic bank capital along multiple dimensions, namely: capital adequacy ratio, Tier 1 capital ratio, and capital-to-total assets ratio. We employ both the Prais-Winston technique and the system GMM estimator to tackle potential omitted variable bias, endogeneity, and simultaneity issues. The evidence shows that Sukuk market development has had a negative effect on capital ratios of Islamic banks. We argue that the development of Sukuk markets may have stimulated the competition between Islamic Banks, inducing them to hold lower capital ratios. Our results also show that trade openness and bank liquidity are positively and significantly related to capital ratios, while bank size and loan loss reserve ratio are negatively and significantly related to capital ratios, as expected.
    Date: 2019–08–21
  3. By: Miroslav Mateev (American University in the Emirates)
    Abstract: This paper investigates the impact of regulation and ownership on the performance of banks in 19 countries in the Middle East and North Africa (MENA) region, over a period of 11 years (2005 - 2015). We test the hypothesis that the effect of regulation on efficiency and profitability depends on the type of bank ownership. We find that only capital regulations have a strong impact on bank efficiency, but this effect does not depend on the level of ownership concentration of the bank. In line with previous empirical studies, we find that the impact of regulatory measures on bank profitability does not depend on bank ownership type. We also investigate whether the impact of regulation and ownership is different between conventional and Islamic banks, and find that the interaction effect of bank regulations and different types of ownership on a bank?s profitability is strongly significant only in the sample of Islamic banks. The analysis of bank performance before and after the recent global financial crisis reveals that bank regulations have no influence on cost efficiency of a conventional bank either before or after the crisis; however, the impact on an Islamic bank?s efficiency is strongly significant in the full sample period and the post-crisis period.
    Keywords: global financial crisis, ownership, bank regulation, efficiency, profitability
    JEL: G21 G28
    Date: 2019–07
  4. By: Simplice A. Asongu (Yaoundé/Cameroon)
    Abstract: This study investigates persistence of global terrorism in a panel of 163 countries for the period 2010 to 2015. The empirical evidence is based on Generalised Method of Moments. The following findings are established. First, persistence in terrorism is a decreasing function of income levels because it consistently increases from high income (through upper middle income) to lower middle income countries. Second, compared to Christian-oriented countries, terrorism is more persistent in Islam-oriented nations. Third, landlocked countries also reflect a higher level of persistence relative to their coastal counterparts. Fourth, Latin American countries show higher degrees of persistence when compared with Middle East and North African (MENA) countries. Fifth, the main determinants of the underlying persistence are political instability and weapons import. The results are discussed to provide answers to four main questions which directly pertain to the reported findings. These questions centre on why comparative persistence in terrorism is based on income levels, religious orientation, landlockedness and regions.
    Keywords: Terrorism; Persistence; Development
    JEL: C52 D74 F42 K42 O38
    Date: 2019–01
  5. By: Moamen Gouda (Hankuk University of Foreign Studies); Marcus Marktanner (Kennesaw State University)
    Abstract: This paper is motivated by reports about Islamic State fighters having received welfare payments from their home countries. This phenomenon is particularly relevant for OECD countries. Using data of foreign fighters and social safety spending, we explore whether jihadism is an inferior or a normal good. Focusing largely on OECD countries and controlling for multicollinearity, simultaneity, and other explanatory factors of expat jihadism, we find strong empirical evidence that more social welfare spending leads to a higher number of foreign fighters. Thus, expat jihadism is a normal, not an inferior good. Our conclusions are policy relevant in the sense that they add to the literature of perverse effects of social welfare spending: Economic hardship is barely a source of radicalization and more generous social safety nets fail to convert radicalization inclined individuals into moderates.
    Date: 2019–08–21

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