Shariah-compliant firms and firm leverage: evidence from firm-level time varying quasi experimental analysis for MENA countries

Talat Ulussever (), Ömer Tuğsal Doruk, Hasan Murat Ertuğrul and Ömer Faruk Tekdoğan
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Talat Ulussever: Bogazici University
Ömer Tuğsal Doruk: Adana Alparslan Türkeş Science and Technology University, Faculty of Business Administration
Hasan Murat Ertuğrul: Anadolu University, FEAS
Ömer Faruk Tekdoğan: Social Sciences University of Ankara

Humanities and Social Sciences Communications, 2025, vol. 12, issue 1, 1-9

Abstract: Abstract This study undertakes an examination of financial leverage, synonymous with firm risk or capital structure, within the context of Shariah-compliant firms. Analyzing firm-level data covering 500 nonfinancial firms across 9 MENA countries, this research employs a time-varying quasi-experimental approach to delve into the primary objective of assessing the comparative financial leverage or capital structure of Shariah-compliant firms concerning their non-Shariah counterparts. We employ time-varying quasi-experimental methods, namely time-varying difference-in-differences methodology, to explore the relative time-varying effect of Shariah-compliance on the firm leverage in the MENA Region. The results unequivocally highlight a distinct trend that the Shariah-compliant firms exhibit notably lower financial leverage compared to their non-Shariah counterparts, even if we consider the time-varying Shariah-compliance dimension. These findings, substantiated through robust modeling techniques, offer compelling insights into the financial dynamics and risk profiles of Shariah-compliant entities across the MENA region.

Date: 2025
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DOI: 10.1057/s41599-025-05001-9

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