The impact of Sharia compliance on attracting investments: empirical evidence from GCC

Omar Ikbal Tawfik, Hamada Elsaid Elmaasrawy and Khaled Hussainey ()

International Journal of Islamic and Middle Eastern Finance and Management, 2024, vol. 18, issue 1, 23-48

Abstract: Purpose - This study aims to demonstrate the impact of Sharia-compliance (SC) on attracting various types of investment, including foreign, family, institutional, royal, government and large individual investments. Design/methodology/approach - The sample comprises 168 nonfinancial companies listed in the financial markets of the Gulf Cooperation Council (GCC) countries from 2009 to 2019, totaling 1,848 observations. The researchers used the ordinary least squares panel data method, with additional tests conducted using the two-stage least squares method. Findings - The results indicate a negative relationship between SC and both foreign and institutional investments. Conversely, there is a positive relationship between SC and both family investment and large individual investor investment. Furthermore, the study found no significant relationship between SC and both government and royal investments (RIs). Practical implications - The study enhances understanding of the role of Sharia-compliant companies in attracting investment. For managers of such companies, there is a need to make their firms more appealing to diverse investor types. Current and potential investors in Sharia-compliant companies should be aware of the investor nature controlling these companies. This study is beneficial for policymakers and regulators to assess the impact of Islamic Sharia-imposed restrictions on financial decision-making in companies. Policymakers should develop and monitor indicators of companies’ adherence to SC law in the six GCC countries and should also issue rules to enhance Sharia-compliant companies’ commitment to governance and transparency. Originality/value - To the best of the authors’ knowledge, this study is the first of its kind to address the impact of SC on attracting different investment types. It includes six distinct investment types, notably RI, a significant variable in GCC countries’ business environment due to the considerable wealth and influence of royal family members.

Keywords: Sariah compliance; Foreign investment; Institutional investment; Royal investment (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

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:eme:imefmp:imefm-02-2024-0060

DOI: 10.1108/IMEFM-02-2024-0060

Access Statistics for this article

International Journal of Islamic and Middle Eastern Finance and Management is currently edited by Dr Syed Aun Raza Rizvi

More articles in International Journal of Islamic and Middle Eastern Finance and Management from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().