The future of Islam after 9/11

This article projects the possible future of Islam in Iran, Egypt, Jordan, and beyond, by analyzing the historical background and extrapolating from survey data collected before and after 11 September 2001. Islamic culture is actively produced, rather than being an inevitable reflection of social arrangements, so it is important to understand how its intellectual leaders and activists perceive and resolve the issues facing their faith. The key concepts are targets, in relation to which ideas are produced, and societal visibility. If these targets are visible and clear, then one may be able to reasonably estimate the kind of religious discourses most likely to develop in the Islamic movement in the future. The future of Islam is most visible in Iran, where there is a move toward reformism and rejection of political Islam. In Jordan, there is a moderate visibility to predict that the country’s Islamic movement will continue its tradition of moderation and conservatism. In Egypt, the future of Islam is least visible. While extremism is on a decline, it is not clear the degree to which a leftist-conservative alliance will dominate the country’s cultural landscape.     

Corporate governance from the Islamic perspective: A comparative analysis with OECD principles

There is a growing concern emerged with a great profile regarding the Islamic principles of corporate governance. A major ethical component of any economic activity in Islam is to provide justice, honest and fairness and to ensure all parties their rights and dues. Islamic economy has progressed a great deal during these last two decades with impetus as an important concern in developing an Islamic corporate system. This paper is an attempt to discuss the nature, applications and comparison of Islamic principles of corporate governance (IPCG) with conventional principles of corporate governance considering special reference to Organization of Economic Co-operation and Development (OECD). After the discussion, it can be concluded that the dimension of Islamic perspectives of corporate governance has broader horizon and cannot compartmentalize the roles and responsibilities in which all actions and obligations fall under the jurisdiction of the divine law of Islam whereas, the OECD principles implements a firm with six different issue and obligations. Furthermore, this paper can provide some insight view in fettering mechanism to controlled, direct and organized economic activity from the Islamic point of view.     

Religion: A Confounding Cultural Element in the International Harmonization of Accounting?

Discussion of the influence of culture on the international development and harmonization of accounting has focused primarily upon indigenous characteristics which are confined within national boundaries. But cultural inputs, such as religion, which transcend national boundaries, should not be overlooked. Islam is a particular case in point. Its principles commit Muslims to a definitive code of ethical commercial and personal behaviour affecting both the structuring and financing of business affairs between the faithful, and between Muslims and non-Muslims. Islam has the potential for influencing the structure, underlying concepts and the mechanisms of accounting in the Islamic world. Its potential for influencing accounting policy is illustrative of religion as a confounding element in the analysis of national idiosyncrasies in accounting practice and in deconstructing the impediments to international harmonization.     

关于我国建立发展伊斯兰保险市场的建议

伊斯兰律法禁止利息、不确定性交易等经济行为,致使传统保险无法满足穆斯林的保险需求。经过多年的研究,全新的伊斯兰保险诞生,并被穆斯林和非穆斯林所接受,而且市场发展正不断地扩张。我国拥有2000多万伊斯兰人口,而伊斯兰保险市场一片空白,也无学术的理论研究。笔者通过分析我国伊斯兰人口的分布情况及民族特征,以及伊斯兰人口集中地新疆的保险发展状况,探讨了我国发展伊斯兰保险市场面临的诸多机遇与挑战,并提出了以新疆为试点发展伊斯兰保险等政策建议。     

Islam, nature and accounting: Islamic principles and the notion of accounting for the environment

Islamic principles are suggestive of a variety of implications for governance and accounting. Reflecting upon Islamic principles, we here engage with the notion of accounting for the environment. Drawing from key Islamic texts and relevant prior literature, we elaborate and discuss key Islamic principles of relevance and delineate what they suggest for accounting. Our endeavours here are consistent with a concern to contribute to a critical theoretical project seeking to develop a progressive and emancipatory universalism that is respectful of difference, a project with its accounting implications. In concluding, we point, among other things, to the irony whereby Western transnational corporations have sought to promote their particular brand of corporate social (and environmental) responsibility accounting in Arab countries, variously influenced by Islam, with little to no mention of a notion of accounting for the environment integral to and deeply rooted in Islam.     

The impact of corporate governance and agency effect on earnings management – A test of the dual banking system

This study investigates the impact of the Board characteristics, Chief Executive Officer’s (CEO) power and Shariah supervision on Earnings Management (EM) within conventional and Islamic banks. We provide evidence that EM levels do not significantly differ between Islamic and conventional banks. Contrary to public belief, additional value-based attributes such as the Shariah Supervisory Board (SSB) that promotes ethical and religious values, do not help in the restriction of opportunistic behaviour in Islamic banks. Additionally, attributes such as board size, firm size and leverage have a significant negative influence on EM of both Islamic and conventional banks. Our results are important in deliberating that the word ‘Islamic’ must not be used merely as a profit manifestation, but instead must promote a value-based business, which in turn could ensure reliability and sustainability.     

Financial distress and the Malaysian dual baking system: A dynamic slacks approach

This paper presents an efficiency assessment of the Malaysian dual banking system using the Dynamic Slacks Based Model (DSBM) in order to assess the evolution of Malaysian Banks’ potential input–saving/output–increase from 2009 to 2013. More precisely, DSBM is used first in a two-stage approach to assess the relative efficiency of Malaysian Islamic and conventional banks by emulating the CAMEL rating systems. Then, in the second stage, Monte Carlo Markov Chain (MCMC) methods applied to generalized linear mixed models (GLMM) are combined with DSBM results as part of an attempt to produce a model for banking performance assessment with effective predictive ability. Results indicate higher inefficiency levels and slacks in Islamic banks when compared to conventional ones. Furthermore, when the scope of analysis is the group of Malaysian Islamic banks, the efficiency levels of foreign banks are lower compared to their national counterparts, suggesting regulatory and cultural barriers. Policy implications are derived.     

Islamic Banking: How Has It Expanded?

We investigate the determinants of the pattern of Islamic bank expansion around the world using country-level data for 1992-2006. The analysis illustrates that income per capita, share of Muslims in the population, and economic integration with Middle Eastern countries are linked to the development of Islamic banking. Interest rates have a negative impact, while the quality of institutions is not found to be significant. The September 11, 2001, attacks were not a major factor in the expansion of Islamic banking, but they coincided with rising oil prices. Islamic banks also appear to be complements to, rather than substitutes for, conventional banks.     

Religion of Islam and Microfinance: Does It Make Any Difference?

This study is the initial attempt to investigate first whether microfinance institutions (MFIs) perform differently in the OIC countries where Islam is the prevailing religion and second, how Islamic microfinance institutions are different (if any) from the conventional MFIs. To accomplish these objectives, we employ a dynamic difference and system-generalized method of moments estimators. Our findings tend to indicate that there are significant differences in the way Islamic MFIs performed and operated as compared to that of the conventional MFIs in certain regions. However, in other regions, there were no significant differences in operation and performance between the Islamic MFIs and Conventional MFIs. The study presents important insights for the Islamic microfinance managers and donors as well as the policy makers.     

Civilizational futures: Clashes or alternative visions in the age of globalization?

This article underlines the existing similarities between Samuel Huntington's civilizational approach hypothesis and the fundamentals of political Islam. The similarity pertains to the argument related to the gradual weakening of nation-states, which also constitutes the main theme of the globalization debate. The civilizational approach and political Islam signify new efforts to reach a much larger political community and organization in world politics. Both of them argue that the formation of new political actor(s) is replacing the old nation-states across religious and cultural affinities. The terrorist organization Al-Qaeda is trying to legitimize its political violence by manipulating the weakness of the nation-states and the utopia of the formation of a much more comprehensive political community and political organization through Islam. Huntington's clash of civilizations thesis indirectly provides a base for Al-Qaeda's rhetoric and a certain type of justification for its terror activities, since the theory argues for the inevitability of the conflict between civilizations, regardless of their political regimes (liberal or totalitarian) with civilizations being determined by their cultural and religious differences—a theme that is used by the ideologues of political Islam.     

The Nature and Rationale of a Conceptual Framework for Financial Reporting by Islamic Banks

Islamic banks have to abide by the revealed doctrines in Islam in conducting their business and financial transactions. They employ in-house religious advisers—often referred to as Shari'a Supervisory Board (SSB)—who issue a special report to inform users of financial statements whether or not the bank has adhered to the Islamic principles. Recently, a private standard-setting body—the Financial Accounting Organization for Islamic Banks and Financial Institutions (FAOIBFI)—has been set up to externally regulate the financial reporting by Islamic banks. The FAOIBFI has published two statements on the objectives and concepts of financial reporting to act as a framework in setting accounting standards for Islamic banks. This paper examines the FAOIBFI's approach for developing objectives and concepts of financial accounting and investigates its need for such a theoretical framework. It is argued that the FAOIBFI's objectives and concepts would not be useful in mandating accounting standards on issues that are affected by religious ruling. This does not necessarily mean that such a framework may not be useful in legitimating the FAOIBFI's role and in setting accounting standards for issues that are not governed by revealed moral doctrines although it will be subject to similar limitations to those found by other standard-setting bodies in utilising and applying their framework. However, it implies that the more the FAOIBFI sets accounting standards that incorporate religious ruling, the less it would tend to find its own objectives and concepts useful. The ambiguities that may arise from different interpretations of the religious rules will require resolutions primarily by reference to religious rather than accounting authority.     

The regulations–risk taking nexus under competitive pressure: What about the Islamic banking system?

Does market power condition the effect of bank regulations and supervision on bank risk taking? We focus on three regulatory tools: capital requirements, the restriction of activities, and official supervisory powers. Employing 10 years of unbalanced panel data on 123 Islamic and conventional banks operating in the Middle East and Asia, we arrive at the following conclusions. First, banking market power strengthens the negative impact of capital regulation on bank risk taking. Second, our empirical results suggest that the negative effect of activity restrictions on stability is diminished when banks have greater market power. Finally, we do not find strong evidence that the negative effect of supervisory power on banks’ risk taking is conditioned by their competitive behavior. In further analysis, we differentiate between Islamic and conventional banks regarding their competition, as well as their risk behavior. The results differ according to the banking business model. These findings could be useful for bank regulators in light of the accomplishment of Islamic banks’ regulatory framework. Indeed, the adoption of Basel III represents a significant regulatory challenge, given that it does not take into account the specificities of Islamic banks.     

Religiosity and bank earnings management: Revisiting international evidence

The modernization theory forecasts a sharp declining effect of institutionalized religion on human behavior owing to the extensive economic development. However, this prediction is rejected and proved that religious values and beliefs have a pervasive influence on individual conduct. Based on this salient evidence, we examine the influence of religious social norms on bank earnings management behavior with regard to ongoing economic development. We use 20,715 bank-year observations from 1318 listed banks of eight geographical regions. We, further, employ an updated dataset of 2007–2021 to resemble the economic prosperity time period. Our study discards the prediction of the modernization theory and reveals that banks located in countries with high religiosity are less likely to manage their reported earnings. While comparing conventional banks with Islamic ones, conventional banks are found to be less prone to the earnings management practice than that of their Islamic counterparts. We also find religiosity to have a greater magnitude of effect on the accounting manipulation in the crisis period than in the post-crisis one. The cross-regional differences in religious values bring differential effects on this unethical practice. Our results are robust with the alternative measures of earnings management and alternative model specifications.     

Political systems and the financial soundness of Islamic banks

We investigate whether and how political systems affect the financial soundness of conventional and Islamic banks. Using factors extracted from principal component analysis, we find that Islamic banks underperform their conventional counterparts in more democratic political systems but outperform them in hybrid and Sharia’a-based legal systems. The findings reflect the challenges Islamic banks face in Western countries in terms of perception, financial infrastructure, and regulatory constraints while mirroring the recognition of their specificities and their cultural and religious compliance with Sharia’a law in Muslim countries. The findings are robust to a battery of alternative estimation techniques and methods of correcting standard errors.     

A Survival Analysis of Islamic and Conventional Banks

Are Islamic banks inherently more stable than conventional banks? We address this question by applying a survival analysis based on the Cox proportional hazard model to a comprehensive sample of 421 banks in 20 Middle and Far Eastern countries from 1995 to 2010. By comparing the failure risk for both bank types, we find that Islamic banks have a significantly lower risk of failure than that of their conventional peers. This lower risk is based both unconditionally and conditionally on bank-specific (microeconomic) variables as well as macroeconomic and market structure variables. Our findings indicate that the design and implementation of early warning systems for bank failure should recognize the distinct risk profiles of the two bank types.     

Religious regimes and prospects for liberal politics: Futures of Iran, Iraq and Saudi Arabia

This paper interrogates Huntington's civilizational perspective in order to assess its power to explain cultural change in a non-Western context. As an alternative, it considers cultural change as issues resolutions. The paper then suggests that the nature of the national regime is one of the most important factors that shapes resolutions of issues—hence the state as one of the best predictors of the future of cultures in Islamic countries. From the values surveys carried out in Iran, Iraq, and Saudi Arabia, this article extrapolates trends in values change among the publics from these countries. Key features of these trends include shifts toward liberal democracy and individualism among Iranians, toward secular politics and nationalism among Iraqis, and away from religiosity and toward support for gender equality among Saudis.     

International Islamic funds

Internationally‐investing Islamic equity funds from developed Islamic and non‐Islamic markets perform in general similar to the market. However, analyzing different market conditions, we provide evidence that funds domiciled in Islamic markets outperform their peers and funds from non‐Islamic markets during market turmoil, irrespective of the applied performance measurement model. We suggest that this outperformance is owed to the expertise of fund managers from developed Islamic markets who operate in a financial environment that is driven by Islamic principles. Our results are robust with respect to the standard Fama‐French three‐factor and four‐factor models as well as to the novel five‐factor model.     

Islamic versus conventional banks in the GCC countries: A comparative study using classification techniques

This paper contributes to the empirical literature on Islamic finance by investigating the feature of Islamic and conventional banks in Gulf Cooperation Council (GCC) countries over the period 2003–2010. We use parametric and non-parametric classification models (Linear discriminant analysis, Logistic regression, Tree of classification and Neural network) to examine whether financial ratios can be used to distinguish between Islamic and conventional banks. Univariate results show that Islamic banks are, on average, more profitable, more liquid, better capitalized, and have lower credit risk than conventional banks. We also find that Islamic banks are, on average, less involved in off-balance sheet activities and have more operating leverage than their conventional peers. Results from classification models show that the two types of banks may be differentiated in terms of credit and insolvency risk, operating leverage and off-balance sheet activities, but not in terms of profitability and liquidity. More interestingly, we find that the recent global financial crisis has a negative impact on the profitability for both Islamic and conventional banks, but time shifted. Finally, results show that Logit regression obtained slightly higher classification accuracies than other models.     

Using partial least square discriminant analysis to distinguish between Islamic and conventional banks in the MENA region

The deterioration of bank profitability poses a threat not only to the interests of consumers and internal staff members but also affects investors who may equally suffer from significant financial losses. It is important to establish an effective system which assists investors in their investment choices. In prior literature, traditional models have been developed, but achieved short‐term performances such as logistic regression and discriminant analysis. This paper applies a partial least squares discriminant analysis (PLS‐DA) to distinguish between conventional and Islamic banks in the Middle East and North Africa (MENA) region based on the financial information for the period 2005–2011. This method can successfully identify the non‐linearity and correlations between financial indicators. The results demonstrate superior performance of the proposed method. On one hand, our model can select all financial ratios to distinguish between banks and at the same time identify the most important variables in the distinction process. On the other hand, the proposed model has high levels in terms of accuracy and stability.     

Fusion of science and culture key to the 21st century

This essay takes as its premise that long-term human survival requires development of a new alliance between science and culture to the point of fusion. Geopolitical rupture with the past and cultural diversity will shape the norms and values underlying future development of science and technology, with a shift occuring from previous science and technology development models. Science will thus require new models of cultural communication, based on reciprocal relations among all humanity without the hegemony of western values, in order that humanity can live peacefully with itself and the environment.