Ethical investing and capital structure

Paresh Kumar Narayan, Dinh Phan (), Guangqiang Liu and Mansor Ibrahim

Emerging Markets Review, 2021, vol. 47, issue C

Abstract: We test the relevance of the trade-off, pecking order, and market timing theories of capital structure from the point of view of a stock's religious orientation. Using a unique sample of Islamic stocks, we discover the leverage speed of adjustment (SOA) to be faster compared to that in the literature on conventional stocks, consistent with trade-off theory. We hypothesize that this result is due to the risk-sharing principal of Islamic investments that substantially reduces market imperfections. The inclusion of variables belonging to other theories of capital structure does not change the SOA, implying the importance of the trade-off theory.

Keywords: Capital structure; Islamic stocks; Leverage, speed of adjustment (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1566014118304643
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:47:y:2021:i:c:s1566014118304643

DOI: 10.1016/j.ememar.2020.100774

Access Statistics for this article

Emerging Markets Review is currently edited by Jonathan A. Batten

More articles in Emerging Markets Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().