Islamic Banking Sustainability: A Review of Literature and Directions for Future Research

This study reviews literature on the Islamic banking sustainability and presents directions for future research. The article discourses scholars’ and practitioners’ views on the two perspectives of sustainability in relation to the objectives of Islamic banking and finance. That there are limited studies on Islamic banking sustainability is one of the major issues presented in the article. The study highlights essential issues on the sustainability without in-depth empirical analysis. The needs for long-term economic, social, and environmental sustainability are not a compromising issue. Therefore, Islamic banks must strike a balance between the institutional, societal, and environmental sustainability in order to achieve the objective of Sharia.     

Shari’ah supervision,corporate governance and performance: Conventional vs. Islamic banks

The performance and accountability of boards of directors and effectiveness of governance mechanisms continue to be a matter of concern. Focusing on differences between conventional banks and Islamic banks, we examine the effect of (i) Shari’ah supervision boards, (ii) board structure and (iii) CEO-power on performance during the period 2005–2011. We find Shari’ah supervision boards positively impact on Islamic banks’ performance when they perform a supervisory role, but the impact is negligible when they have only an advisory role. The effect of board structure (board size and board independence) and CEO power (CEO-chair duality and internally recruited CEO) on the performance of Islamic banks is overall negative. Our findings provide support for the positive contribution of Shari’ah supervision boards but also emphasize the need for enforcement and regulatory mechanism for them to be more effective.     

Risk,return and mean‐variance efficiency of Islamic and non‐Islamic stocks: evidence from a unique Malaysian data set

We find that Islamic stocks are more mean–variance efficient than non‐Islamic stocks and the market because they reduce risk of the same level of returns. We combine a unique Malaysian data set of individual Islamic stocks (as opposed to aggregate stock indices) since 1997 with a new method where we apply Islamic business activity and financial ratio screens to the universe of Malaysian stocks. Both data sets show that Islamic stocks have an annualised standard deviation that is on average 3.43–3.78 percent points lower compared to non‐Islamic stocks. This lower variance of Islamic stocks is exclusively driven by financial ratio screens.     

Testing the Conventional and Islamic Financial Market Contagion: Evidence from Wavelet Analysis

This study is a first attempt at testing the extent of contagion for conventional and Shari’ah-compliant stock indices. We examine the period surrounding the U.S. subprime crisis of 2007–9 and the Lehman Brothers collapse of 2008 to determine the relative extent of contagion. We find no clear evidence of contagion during the subprime crisis however, during the Lehman collapse most conventional indices showed contagion. Interestingly, the Shari’ah-compliant indices mostly do not show evidence of contagion. Collectively, our results have important implications for fund managers in terms of asset allocation risk and policymakers seeking an optimal policy response to crises.     

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.     

Investment appraisal practices: A comparative study of conventional and Islamic financial institutions

This paper compares the use of capital budgeting techniques of conventional and Islamic financial institutions, using data obtained from a survey of 105 conventional and Islamic financial institutions. Our main aim is to analyze the use of capital budgeting and risk techniques by the two types of financial institutions from a comparative perspective to see whether prohibition of riba makes a difference. Standard difference-of-means tests of the mean scores methods were used to test the hypotheses of the study. The results reveal a number of important conclusions. First, discounted cash flow techniques are found to be more widely used by financial institutions, and among those techniques internal rate of return is the most common. Second, Islamic financial institutions are found to adopt traditional methods that do not comply with the principles of Islamic Sharia'a. Third, a huge gap is found between the theory base of Islamic institutions and some of the practices of those institutions. Fourth, firms' characteristics, such as size, listing status, sources of revenue and government ownership, have some impact on their decisions to adopt capital budgeting criteria, methods of estimating costs of capital and risk. Finally, the decisions to select particular capital budgeting techniques, cost of capital estimation methods, and risk assessments are partly related to the characteristics of the chief financial officers.     

Indigenous sustainable finance as a research field: A systematic literature review on indigenising ESG,sustainability and indigenous community practices

Sustainable finance research has come into its own as an established area in the finance literature. The increased awareness of sustainability and global concerns around environmental, social and governance (ESG) issues, particularly among institutional investors, has catalysed a shift towards greater research and publications in this area. Accompanying this is the emerging body of work being produced on indigenous investments and indigenous community practices. These nascent strands of literature tell a story of the shift that is taking place within the finance field. To chart this shift and create a harmonised view of these bodies of work, this paper conducts a systematic literature review of the significant nexus between sustainable investments and indigenous approaches to sustainability. We present a framework for conceptualising and characterising the various stands of literature and, in so doing, make the case for Indigenous Sustainable Finance (ISF) as a distinct disciplinary field. This paper argues that ISF is distinct from mainstream sustainable finance and other social and management sciences and constitutes a legitimate, well-defined sub-field of research in its own right.     

Sustainable finance and blockchain: A systematic review and research agenda

Sustainable finance and blockchain studies have garnered considerable interest recently. but there has been no systematic analysis of blockchain in sustainable finance to far. To fill this gap, based on the theme structure of blockchain research in the field of renewable finance from November 1, 2008 to January 31, 2022, this paper proposes a multi-level and all-round comprehensive bibliometric method (Co-occurrence Analysis method, Natural Language Processing method, and Exploratory Factor Analysis method) to comprehend the mode, process, and mechanism of the integration of them. The findings indicate that: (1) Blockchain has been widely used in many industries involved in sustainable finance; (2) Blockchain will have a long-term impact on Sustainable Finance in the fields of smart city and sharing economy; (3) Blockchain can be deeply integrated with other technologies to promote the diversified development of sustainable finance. Additionally, we highlight trends and research directions regarding blockchain in sustainable finance research.     

A shared boundary object: Financial innovation and engineering in Islamic financial institutions

This paper explores the way in which ethico-faith-based rules act as a boundary object in constraining the process of financial innovation and engineering (FIE) in Islamic Financial Institutions (IFIs). The paper examines how this faith-based approach is enacted in the FIE process amid different social worlds and groups that cooperate without consensus within IFIs. We contribute to studies of governance in faith-based organizations, by identifying the plasticity of faith-based rules that act as boundary objects in the governance of the FIE process. The plasticity of ethico-faith based rules allows coordination among local and global actors with intersecting faith-based values, logics, and interests. IFIs ensure that the products of FIE become an integral part of and as compatible as possible with the logics of global financial markets.     

中国国家审计:问题与改革——一次问卷调查的综述

为深化国家审计问题研究,我们在全国范围内进行了一次问卷调查。本文是对此次问卷调查所作的概述,包括调查背景、调查内容、调查对象、调查规模、调查实施、调查数据统计分析、调查结论等方面。调查发现:答卷者对中国国家审计的现行行政型定位和体制弊端有较为明确、一致的认识;改革现行审计体制是大多数答卷者的意见;改革观点极不统一,但相对而言,立法论更容易得到各方面比较一致的认同。     

建立覆盖城乡居民的养老保险体系研究:一个文献综述

建立覆盖城乡居民的养老保险体系一直是政府努力的方向和目标。文章从覆盖城乡居民养老保险的内涵入手,阐述了覆盖城乡居民养老保险体系建设的目标模式、制度框架和路径选择,同时还综述了国内学者对新型农村养老保险、农民工养老保险、被征地农民养老保险与覆盖城乡居民养老保险体系关系的新进展。最后,指出了建立覆盖城乡居民养老保险体系需要进一步关注的问题。     

Sectorial differences in corporate financial behavior: an international survey

This survey-based research deals with sectorial differences in terms of three main corporate finance policies: investment, financing and dividend. We used a multinational survey that was distributed to the chief financial officers in five countries: the US, the UK, Germany, Canada and Japan. We found statistically significant differences between the nine sectors examined in terms of all the three major financial policies. These differences may be due to the following: (1) the unique financial needs and operating conditions of each sector and (2) the imitation effect according to which firms imitate the financial behavior of other firms in their sector. We found that the use of established investment appraisal techniques is most common in the construction sector and least common in the technology sector. The IRR is the most frequently used investment appraisal technique for the entire survey sample, especially in the communication sector; however, it is rarely used in the technology sector. The technology sector has the lowest level of financial leveraging, while the finance sector has the highest level. A constant sum per share is the most common dividend policy in the following sectors: retail and wholesale, services, manufacturing and transport. On the other hand, construction, energy, communication and technology sectors are characterized by a high percentage of firms that do not pay dividends at all.     

A Note on the Proprietary and Entity Perspectives in Financial Statements: The Implications for two Current Controversial Issues

Financial statements can portray the financial position and performance of an entity from different perspectives. Two dominant perspectives are the proprietary and entity perspectives. These perspectives also feature in recent discussions by the IASB and the FASB in relation to their conceptual framework project. The adopted perspective will yield different presentations for a number of issues. This paper illustrates the implications for two controversial issues currently under discussion by the IASB and the FASB: accounting for changes in a reporting entity’s own credit risk when liabilities are measured at fair value, and the classification of certain obligations as either equity or liabilities. The paper explains why the adoption and consistent application of one perspective are important for standard setting and financial reporting to ensure the consistent presentation of an entity’s performance and financial position that can be correctly interpreted by users of financial statements against the background of the chosen perspective.