ISLAMIC LABEL AND STOCK PRICE CRASH RISK

Bambang Sutrisno (), Irwan Trinugroho (), Taufiq Arifin () and Tastaftiyan Risfandy ()
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Bambang Sutrisno: Universitas Sebelas Maret, Indonesia
Irwan Trinugroho: Universitas Sebelas Maret, Indonesia
Taufiq Arifin: Universitas Sebelas Maret, Indonesia
Tastaftiyan Risfandy: Universitas Sebelas Maret, Indonesia

Journal of Islamic Monetary Economics and Finance, 2025, vol. 11, issue 2, 331-350

Abstract: This study explores how an Islamic label on firms influences stock price crash risk in Indonesia. We utilize a sample of 566 nonfinancial firms listed between 2016 and 2021, apply panel data method, and find that the Islamic label benefits the firms by lowering crash risk. Investors consider firms with the Islamic label as lower risk due to leverage constraints they must adhere to, which contributes to a decreased crash risk. Our primary results are robust to various sensitivity analyses. We also find that dividend policy and audit quality strengthen the Islamic label-crash risk nexus. The COVID-19 pandemic weakens the link between the Islamic label and crash risk. Furthermore, the Islamic label-crash risk nexus persists for up to two years.

Keywords: Islamic label; Stock price crash risk; Dividend policy; Audit quality; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: G32 G34 Z12 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:idn:jimfjn:v:11:y:2025:i:2e:p:331-350

DOI: 10.21098/jimf.v11i2.2661

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