Corporate liquidity : evidence from Islamic and non-Islamic countries
Joint Authors
Source
International Journal of Islamic Economics and Finance Studies
Issue
Vol. 6, Issue 3 (30 Nov. 2020), pp.249-292, 44 p.
Publisher
Centre of Political Economical and Social Research
Publication Date
2020-11-30
Country of Publication
Turkey
No. of Pages
44
Main Subjects
Abstract EN
This study examines whether and how Islam has bearings on corporate liquidity (cash holdings).
A review of 34,895 non-financial firms from 68 countries (12 Muslim majority countries and 56 other countries, which consist of 26 developing and 30 developed countries) from 1996 to 2011 reveals that cash holdings are lower in Muslim majority countries than in other countries, particularly developed countries.
This phenomenon appears to be more pronounced when financial development is high or anti-director rights are weak in Muslim majority countries.
The lower cash holdings in Muslim majority countries can be explained by the modifying effect of Islam and Sharia compliance (SC) on cash determination.
Specifically, the negative effect of leverage on cash is stronger in Muslim majority countries than in other developing countries when financial development is high, financial structure is market-based, or national governance is strong in the former.
Moreover, SC has a direct and negative effect on cash, which is more pronounced when financial development is low, financial structure is bank-based, or anti-director rights are weak in Muslim majority countries.
Furthermore, SC negatively affects cash through growth opportunities and dividend payment.
Specifically, SC weakens the positive effect of growth opportunities on cash when financial structure is market-based.
SC also weakens the positive effect of dividend payment on cash, and such a modifying effect is stronger when anti-director rights are weak.
Overall, the results suggest the uniqueness of the cash policy in Muslim majority countries compared with other countries.
American Psychological Association (APA)
Chen, Naiwei& Yang, Tsai-Chen. 2020. Corporate liquidity : evidence from Islamic and non-Islamic countries. International Journal of Islamic Economics and Finance Studies،Vol. 6, no. 3, pp.249-292.
https://search.emarefa.net/detail/BIM-1429536
Modern Language Association (MLA)
Chen, Naiwei& Yang, Tsai-Chen. Corporate liquidity : evidence from Islamic and non-Islamic countries. International Journal of Islamic Economics and Finance Studies Vol. 6, no. 3 (Nov. 2020), pp.249-292.
https://search.emarefa.net/detail/BIM-1429536
American Medical Association (AMA)
Chen, Naiwei& Yang, Tsai-Chen. Corporate liquidity : evidence from Islamic and non-Islamic countries. International Journal of Islamic Economics and Finance Studies. 2020. Vol. 6, no. 3, pp.249-292.
https://search.emarefa.net/detail/BIM-1429536
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references : p. 288-292
Record ID
BIM-1429536