Corporate Resilience Against the COVID‐19 Crisis: How Valuable is an Islamic Label?

Mohammed Abdullah Al Mamun, Md Lutfur Rahman and Md Reiazul Haque

Journal of Business Finance & Accounting, 2025, vol. 52, issue 4, 1713-1734

Abstract: The COVID‐19 pandemic provides a novel setting to explore whether an Islamic label benefits firms during a crisis. The existing literature mostly explores the differential performance between Islamic and conventional equity markets at the aggregate level without controlling for idiosyncratic firm characteristics. Using the cross‐sectional and difference‐in‐differences (DiD) regressions, we provide novel evidence at the firm level on how market segmentation based on investors’ religious or ethical preferences significantly affects how firms withstand a crisis. Segregating S&P1500 companies into Islamic and non‐Islamic, we show that an Islamic label has a significantly positive (negative) impact on abnormal returns and operating performance (volatility). Specifically, S&P1500 Islamic firms generate an extra daily return of 0.64% and exhibit 1.2% lower daily volatility than their non‐Islamic counterparts. Although researchers report firms’ environmental and social (ES) performance as a resilience factor during the COVID‐19 crisis, we observe that the ES score does not offer explanatory power when we control firm‐level financial variables. In contrast, the Islamic label remains a statistically and economically significant positive determinant of pandemic period returns and operating performance. Our key findings are robust in (i) the cross‐sectional and DiD regressions; (ii) alternative definitions of abnormal returns, volatility, and operating performance; (iii) the propensity score‐matched samples; and (iv) S&P500 Islamic and non‐Islamic subsamples.

Date: 2025
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