Investor protection and dividend policy: The case of Islamic and conventional banks

Seyed Alireza Athari, Cahit Adaoglu and Eralp Bektas

Emerging Markets Review, 2016, vol. 27, issue C, 100-117

Abstract: This study examines the dividend policy behavior of Islamic and conventional banks operating in Arab markets. These banks operate in an environment of Sharia law and low levels of investor protection. Our results support the substitution agency model of dividends for Islamic banks, and Islamic banks use the dividend policy as a substitute mechanism for alleviating relatively more significant agency problems and higher risks of expropriation by insiders. In these markets, conventional banks operate in a more competitive environment and experience relatively less significant agency problems. In contrast to Islamic banks, conventional banks follow the outcome agency model of dividends.

Keywords: Dividend policy; Agency theory; Outcome; Substitute; Islamic banks; Conventional banks (search for similar items in EconPapers)
JEL-codes: G21 G35 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:27:y:2016:i:c:p:100-117

DOI: 10.1016/j.ememar.2016.04.001

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