A Comparative Analysis Between Shariah-compliant & Non-Shariah compliant Stocks

Authors

  • Nurul Syakirah Rifin Faculty of Business and Management, Widad University College, Pahang, Malaysia
  • Salwana Hassan Faculty of Business and Management/ Accounting Research Institute, Universiti Teknologi MARA, Selangor, Malaysia
  • Nordin Abu Bakar Faculty of Computer and Mathematical Sciences, Universiti Teknologi MARA, Selangor, Malaysia
  • Zahariah Sahudin Faculty of business and Management, Universiti Teknologi MARA, Selangor, Malaysia

Keywords:

Stock return, Shariah-compliant, Service sector, Multiple regression, Determinants

Abstract

The study reported by this paper investigated the behaviour of stock returns among Shariah-compliant firms and non-Shariah compliant firms of service industry in Malaysia. The data of 50 firms listed in Bursa Malaysia were obtained from 2008 to 2012. It focused on the relationship between the stock returns and the financial ratios (firm size, market to book ratio, price-earnings ratio and total debt) as the microeconomic variables. While the gross domestic product (GDP), interest rate and inflation rate as the macroeconomic variables toward the stock return. Using regression analysis applying OLS technique, the results showed a significant similarity between Shariah-compliant firms and their counterparts. For Shariah-compliant firms, it is found that firm size and total debt is the most significant variables explaining returns, on the other hand, for non-Shariah compliant firms, price-earnings ratio, interest rate and inflation rate are the most significant variables influencing returns.

References

Albaity, M. & Ahmad, R.(2011). A Comparative Analysis of the Firm-Specific Determinants of Syariah Compliant Versus on-Syariah Compliant Firms in Bursa Malaysia. Asian Journal of Business and Accounting, 4(1), 59-84.

Allozi, N. M & Obeidat, G. S. (2016). The Relationship between the Stock Return and Financial Indicators (Profitability, Leverage): An Empirical Study on Manufacturing Companies Listed in Amman Stock Exchange. Journal of Social Sciences, 5(3), 408 - 424.

Apergis, N. & Eleftheriou, S. (2002). Interest Rates, Inflation, and Stock Prices: The Case of the Athens Stock Exchange. Journal of Policy Modeling, 24, 231-236.

Campbell, J. & Shiller, R. (1988). Stock Prices, Earnings And Expected Dividends. Journal of Finance, 48, 1661-1676.

Coovadia, M. (2014). The Dynamic Relationship between Economic Factors and the South African Stock Market. University of the Witwatersrand, Johannesburg.

Dadrasmoghaddam, A. & Akbari, S. M. (2015). Relationship between Financial Ratios in the Stock Prices of Agriculture-Related Companies Accepted on the Stock Exchange for Iran. Research Journal of Fisheries and Hydrobiology, 10(9),586-591.

Dita, A. H. & Murtaqi, I. (2014). The Effect of Next Profit Margin, Price to Book Value and Debt to Equity Ratio to Stock Return in the Indonesian Consumer Goods Sector. Journal of Business and Management, 3(3), 305 - 315.

Emrah, O. (2009). The Relationship Between Stock Returns And Macroeconomic Factors: Evidence From Turkey. The University Of Exeter.

Fama, E.F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance, 25, 383-417.

Gjerde, O. & Saettem, F. (1999). Causal Relations among Stock Returns and Macroeconomic Variables in a Small, Open Economy. Journal of International Financial Markets, Institutions and Money, 9, 61-74.

Kim, S.J., Moshirian, F. & Wu, E. (2005). Dynamic Stock Market Integration Driven by the European Monetary Union: An Empirical Analysis. Journal of Banking & Finance, 29(10), 2475-2502.

Mahmood, I., Nazir, F. & Junid, M. (2015). Stock Prices and Inflation: A Case Study of Pakistan. Journal of Asian Business Strategy, 4(12) 217-223.

Muradoglu, G. & Metin, K. (1996). Efficiency of the Turkish Stock Exchange with Respect to Monetary Variables: A Cointegration Analysis. European Journal of Operational Research, 90(3), 566-576.

Pandey, I. M. (2001). The Expected Stock Returns of Malaysian Firms: A Panel Data Analysis. Working Paper No. 2001-09-01 Indian Institute of Management, India.

Paudel, N. P. (2005). Financial System and Economic Development, Nepal Rastra Bank in Fifty Years, Part –II, Financial System. Kathmandu: NRB.

Petcharabul, P. & Romprasert, S. (2014). Technology Industry on Financial Ratios and Stock Returns. Journal of Business and Economics, 5(5), 739-746.

Sadeghi, M. (2008). Financial Performance of Shariah-Compliant Investment: Evidence from Malaysian Stock Market. International Research Journal of Finance and Economics, 20, 15-26.

Shawtari, F. & Salem, M. A. (2015). Long Run Relationship between Macroeconomic Indicators and Stock Price: The Case of South Africa. Journal of Internet Banking and Commerce.

Turgut, T., Rjoub, H. & Nil, G. (2009). The Effects of Macroeconomic Factors on Stock Returns: Istanbul Stock Market. Studies in Economics and Finance, 26(1), 36 – 45.

Wong, K. A., Tan, R. S., & Liu, W. (2006). The Cross-Section of Stock Returns on the Shanghai Stock Exchange. Review of Quantitative Finan

Downloads

Published

2019-09-30

How to Cite

Rifin, N. S. ., Hassan, S. ., Abu Bakar, N. ., & Sahudin, Z. . (2019). A Comparative Analysis Between Shariah-compliant & Non-Shariah compliant Stocks. Journal of Emerging Economies and Islamic Research, 7(3), 26–32. Retrieved from https://journal.uitm.edu.my/ojs/index.php/JEEIR/article/view/3967

Issue

Vol. 7 No. 3 (2019): September 2019 Issue

Section

Articles

License

Copyright (c) 2019 Nurul Syakirah Rifin, Salwana Hassan, Nordin Abu Bakar, Zahariah Sahudin

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.