Does it pay to be Shariah-compliant? Evidence from the European stock market

Authors

  • ANTONIO SALVI LUM Jean Monnet University
  • MARIANNA ZITO LUM Jean Monnet University
  • ALESSANDRA CARAGNANO LUM Jean Monnet University

DOI:

https://doi.org/10.13135/2421-2172/3073

Abstract

The comparison of financial results between different cultural and religious systems is still an open academic debate. There is no consensus among scholars on the existence and magnitude of financial performance differences for companies acting under diverse cultural and religious background.

The aim of this paper is to compare the performance of European listed firms applying Shariah principles and those who do not act according to such guidelines. To serve such purpose we have built a sample of companies operating with Shariah-based principles of management and compared the latter with a control comprising companies that do not adopt Shariah parameters over the period 2005–2017.

Results suggest that the Shariah-compliant sample performs better than the conventional one. In particular, during the recent recession, Shariah-compliant companies obtained better periodical stock market returns and even in the event of negative returns, losses posted by these companies were lower than those of conventional companies. Moreover, Shariah-compliant sample presents a lower risk-profile than conventional one.

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Published

2019-02-15

How to Cite

SALVI, A., ZITO, M., & CARAGNANO, A. (2019). Does it pay to be Shariah-compliant? Evidence from the European stock market. European Journal of Islamic Finance. https://doi.org/10.13135/2421-2172/3073

Issue

Special Issue Islamic and Social Finance: Comparing Policies and Solutions for Funding Public Infrastructures and Social Services at Global Level

Section

Peer-reviewed Articles

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Authors keep the copyrights for their work and give the journal the work's first publication copyright, which is at the same time licensed under a Creative Commons License – Attribution, which in turn allows other parties to share the work with an acknowledgement of the work's authorship and initial publication in this journal.