Challenges toShariahequity screening, fromShariahscholars’ perspective

Anna Azmi, Normawati Non and Norazlin Ab Aziz

International Journal of Islamic and Middle Eastern Finance and Management, 2017, vol. 10, issue 2, 229-242

Abstract: Purpose - This paper aims to examine the challenges of applyingShariahlaw in the equity market by engaging in narratives withShariahscreeners and advisors on how they conduct their screening responsibilities despite the low levels of Islamic-related disclosure made by companies in their annual reports. TheShariahscreening processes in three countries with different Islamic equity markets – Malaysia, Saudi Arabia and the United Kingdom – are examined. Design/methodology/approach - The authors interview 19Shariahscreeners and advisors in three different Islamic equity markets – Malaysia, Saudi Arabia and the United Kingdom. Findings - Overall, the findings in this study show that despite the differences in the regulatory environment, companies still make Islamic-related disclosures on a voluntary basis. However, the lack of Islamic-related disclosures presents various challenges forShariahscreeners, particularly when identifying the operations that constitute the main activity of the company in screening for prohibited activities. Research limitations/implications - Shariahscreeners can play an important role in increasing the level of understanding and perhaps increasing Islamic-related disclosures in annual reports by establishing a set of effective guidelines or practices forShariahscreeners to use when screening companies for theirShariah-compliant status. Originality/value - The paper identifies a gap in theShariahscreening literature and voluntary Islamic disclosures literature. By identifying this gap, the paper highlights the challengesShariahscreeners and advisors face because of the low level of Islamic-related disclosures.

Keywords: Islam; Shariah compliant; Ethical funds; Screening method (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eme:imefmp:imefm-11-2016-0165

DOI: 10.1108/IMEFM-11-2016-0165

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