Journal Article

Halal Investment Sensitivity to Cash Flow and the Effects of Capital Market Imperfections

Abou Elseoud, Mohamed Sayed

2024

Overview

This paper examines the relationship between hālal investment sensitivity and cash flow, as well as the impact of capital market imperfections on investment sensitivity in ṣukūk -dependent companies versus conventional enterprises in six countries: Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Bahrain, and Malaysia. The research is based on panel data from 240 non-financially listed conventional and Islamic enterprises from 2018 to 2022. The study incorporates both analytical and econometric approaches. Stationarity, co-integration, and multivariate Granger-Causality tests are carried out using the estimated equations. The study finds that there are considerable distinctions between ṣukūk -dependent firms and traditional enterprises. At the 5% significance level, both groups' investment expenditures responded significantly to cash flow. But hālal investment rises by $0.14 for ṣukūk -dependent companies, whereas conventional investment climbs by $0.17 for conventional businesses when current cash flow rises by $1. Market capital imperfections, as assessed by four factors, have a significant effect on hālal investment cash flow sensitivity. The sensitivity of hālal investments to cash flows diminishes when fund flows, analyst following, institutional ownership, and the corporate governance index increase. Finally, the Grnagel causality tests confirm the study's alternative hypotheses. There is a bidirectional causal relationship between hālal investment and cash flow, while there is a unidirectional relationship from capital market imperfections to hālal investment-cash flow sensitivity.

• Publisher: جامعة الملك عبدالعزيز - معهد الاقتصاد الإسلامي
• Subject: التمويل الإسلامي / الشريعة الإسلامية / النفقات الاستثمارية / رأس المال