SHARIAH COMPLIANT FIRMS AND RISK SHARING UNDER PANDEMIC ERA
Article Sidebar
Read Counter : 1353
Download : 848
Main Article Content
Abstract
In this paper we analyse the Shari’ah Compliant (here after SC) firms and how do they share the output risk under pandemic era. Firms that are accepted to be SC, have been exposed to financial ratio restrictions (like debt ratios, profit ratio or current assets). For those firm not able to use debt to eliminate the income shocks, It is expected that firms after a negative output shock would be reflected to shareholders. In this paper, we measure to what extent SC firms share the risk of income shocks with the market and shareholders. Under pandemic era, SC firms have been exposed to substantial negative income shocks. For the sake of holding their SC certificates, debt leverage is not considered as an option but dropping (or cutting down) dividend payments would make the firms look bad, if they have not done it before. At this stage, firms that have the flexibility to share their income shocks with both market and shareholders before, i.e, produce more on boom market and distribute more dividends and produce less on recession and distribute less dividends, are performed better – stock prices returned to original levels earlier-during the pandemic area.
Downloads
Article Details
Issue
Section
Journal of Islamic Monetary Economics and Finance is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
How to Cite
References
Aivazian, V. A., Booth, L., & Cleary, S. (2006). Dividend smoothing and debt ratings. Journal of Financial and Quantitative Analysis, 41(2), 439-453.
Anderson, R. W., & Carverhill, A. (2012). Corporate liquidity and capital structure. The Review of Financial Studies, 25(3), 797-837.
Asdrubali, P., Sørensen, B. E., & Yosha, O. (1996). Channels of interstate risk sharing: United States 1963–1990. The Quarterly Journal of Economics, 111(4), 1081-1110.
Balli, F., Agyemang, A., Gregory-Allen, R., & Balli, H. O. (2022). Corporate dividend smoothing: The role of cross-listing. Journal of Corporate Finance, 72, 102151.
Balli, F., Basher, S. A., & Balli, H. O. (2013). International income risk-sharing and the global financial crisis of 2008–2009. Journal of Banking & Finance, 37(7), 2303-2313.
Balli, F., Basher, S. A., & Balli, H. O. (2011). Income insurance and the determinants of income insurance via foreign asset revenues and foreign liability payments. Economic Modelling, 28(5), 2296-2306.
Balli, F., Kalemli‐Ozcan, S., & Sørensen, B. E. (2012). Risk sharing through capital gains. Canadian Journal of Economics/Revue canadienne d'économique, 45(2), 472-492.
Balli, F., Pericoli, F. M., & Pierucci, E. (2014). Foreign portfolio diversification and risk-sharing. Economics Letters, 125(2), 187-190.
Balli, F., Pericoli, F. M., & Pierucci, E. (2016). Channels of risk sharing at micro level: Savings, investments and risk aversion heterogeneity. International Journal of Finance & Economics, 21(1), 90-104.
Balli, F., Pierucci, E., & Fu, F. (2019). Risk sharing role of foreign aid in developing countries. Applied Economics, 51(53), 5753-5766.
Balli, F., & Rana, F. (2015). Determinants of risk sharing through remittances. Journal of Banking & Finance, 55, 107-116.
Brav, A., Graham, J.R, Harvey, C.R., & Michaely, R. (2005). Payouts policy in the 21st century. Journal of Financial Economics, 77(3), 483–527.
DeAngelo, H., & DeAngelo, L. (1990). Dividend policy and financial distress: An empirical investigation of troubled NYSE firms. The Journal of Finance, 45(5), 1415-1431.
Fama, E. F. (1974). The empirical relationships between the dividend and investment decisions of firms. The American Economic Review, 64(3), 304-318.
Hoang, E. C., & Hoxha, I. (2016). Corporate payout smoothing: A variance decomposition approach. Journal of Empirical Finance, 35, 1-13.
Jensen, M.C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American Economic Review, 76(2), 323-329.
Lambrecht, B. M., & Myers, S. C. (2012). A lintner model of payout and managerial rents. The Journal of Finance, 67(5), 1761-1810.
Lintner, J. (1956). Distribution of incomes of corporations among dividends, retained earnings, and taxes. The American Economic Review, 46(2), 97-113.
Miller, M. H., & Modigliani, F. (1961). Dividend policy, growth, and the valuation of shares. The Journal of Business, 34(4), 411-433.
Myers, S. C. (1984). The capital structure puzzle. NBER Working Paper Series No. 1393, Massachusetts Avenue Cambridge, MA 02138, pp 1-35.
Myers, S.C., & Majluf, N.S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187-221.
Sørensen, B. E., & Yosha, O. (1998). International risk sharing and European monetary unification. Journal of International Economics, 45(2), 211-238.