Effect of Shariah Compliance on Operating Performance: Evidence from GCC Countries

Serkan Akguc and Naseem Al Rahahleh

Emerging Markets Finance and Trade, 2018, vol. 54, issue 12, 2874-2896

Abstract: We examine the operating performance of Shariah-compliant (SC) vs. non-Shariah-compliant (NSC) firms in six Gulf Cooperation Council (GCC) countries during 2000–2014 using a unique dataset from S&P’s Compustat Global database and show robust evidence that SC firms are operationally much more profitable than NSC firms. We show that higher operating profit margin (due to lower cost structure) and higher total asset turnover (i.e., asset efficiency) of SC firms compared to NSC firms are the primary drivers of the profitability difference. We also find that this association is more pronounced for firms that are always SC or always NSC during sample period.

Date: 2018
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DOI: 10.1080/1540496X.2018.1425991

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