TY - JOUR
T1 - The Shariah compliance challenge in Islamic bond markets
AU - Azmat, Saad
AU - Skully, Michael Thomas
AU - Brown, Kym Eva
PY - 2014
Y1 - 2014
N2 - This paper considers the interaction between Shariah advisors, regulators, Shariah conscious ethical investors and an Islamic bond issuing firm. The model shows that due to higher Islamic instrument cost, the Islamic bond industry s existence is contingent upon a Shariah conscious ethical investor base that can absorb the lower Shariah premium. The results also suggest that competition amongst Shariah advisors along with issuer fatwa shopping results in non-compliant (or less than fully compliant) Islamic financial instruments. This study contributes to Islamic finance theory by suggesting that apart from market incentives and stronger regulations, the Shariah compliance challenge is dependent on Shariah conscious ethical investors.
AB - This paper considers the interaction between Shariah advisors, regulators, Shariah conscious ethical investors and an Islamic bond issuing firm. The model shows that due to higher Islamic instrument cost, the Islamic bond industry s existence is contingent upon a Shariah conscious ethical investor base that can absorb the lower Shariah premium. The results also suggest that competition amongst Shariah advisors along with issuer fatwa shopping results in non-compliant (or less than fully compliant) Islamic financial instruments. This study contributes to Islamic finance theory by suggesting that apart from market incentives and stronger regulations, the Shariah compliance challenge is dependent on Shariah conscious ethical investors.
U2 - 10.1016/j.pacfin.2013.11.003
DO - 10.1016/j.pacfin.2013.11.003
M3 - Article
VL - 28
SP - 47
EP - 57
JO - Pacific Basin Finance Journal
JF - Pacific Basin Finance Journal
SN - 0927-538X
ER -