WEATHERING THE STORM: SHARIAH COMPLIANCE, DIGITAL INNOVATION, AND STOCK PERFORMANCE DURING COVID-19

Mohamad Ikhsan Modjo (), Florencia Putridamni () and Ariella Shenny Lin ()
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Mohamad Ikhsan Modjo: BINUS University, Indonesia
Florencia Putridamni: BINUS University, Indonesia
Ariella Shenny Lin: BINUS University, Indonesia

Journal of Islamic Monetary Economics and Finance, 2025, vol. 11, issue 2, 385-418

Abstract: The COVID-19 pandemic disrupted global financial markets, highlighting the need for factors that enhance resilience. This study examines whether Shariah compliance and digital innovation, individually and together, mitigate declines in stock performance during economic downturns. Drawing on Signaling Theory and Dynamic Capabilities Theory (DCT), this study argues that Shariah compliance serves as a signal of strong governance, while digital innovation enhances adaptability. Using firm-level data from Indonesia and a difference-in-differences (DID) model, our findings suggest that both factors help firms withstand crises, with digital innovation amplifying the benefits of Shariah compliance. This study provides insights into how Islamic finance and digital transformation contribute to financial stability.

Keywords: Shariah stocks; Stock performance; COVID-19; Digital transformation (search for similar items in EconPapers)
JEL-codes: G24 K42 O33 (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:2g:p:385-418

DOI: 10.21098/jimf.v11i2.2437

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