Islamic banks stock market valuation: evidence from Saudi Arabia

Mohamed Fawzy Omran

International Journal of Islamic Marketing and Branding, 2017, vol. 2, issue 2, 122-133

Abstract: The paper uses data from Saudi Arabia during the period from 2003 to 2012 to examine whether investors in Saudi stock market favourably value Islamic banks. The results confirm the proposition that the financial performance of Saudi Islamic banks lagged that of the Saudi conventional banks. In contrast to earlier evidence in the literature from Islamic banks in the UAE, investors in Saudi Arabia do not pay higher price to book value multiple for the Islamic banks' stocks. The finding can be explained by the fact that Islamic banks in Saudi Arabia lag in financial performance as compared to their Saudi conventional counterparts by a greater margin than that reported in the UAE. The results suggest that there is a need to develop measures that tie up between the objectives of Islamic banks, which are by definition not wealth maximisation, and their performance measurements. Otherwise, they will continue to underperform their conventional counterparts with no proof that they have contributed to the aim of Islamic economics which is the advancement of the society.

Keywords: Islamic finance; valuation; financial reporting; Saudi Arabia. (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijimbr:v:2:y:2017:i:2:p:122-133

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