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What explain capital structure determinants choices of Shariah firms?

This study aims to discover key capital structure determinants for the entire Shariah firms operating in dissimilar contexts. Moreover, it also estimates the adjustment speed for these firms to maintain targeted capital structures at all times. For this purpose, 321 Shariah firms that are operationa...

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Main Authors:	Raja, Rehan, Adam Sa'ad, Auwal, Rosman, Romzie, Hye, Qazi Muhammad Adnan
Format:	Article
Language:	English English
Published:	AESS Publications 2024
Subjects:	BPH Islamic Economics BPH72 Economic development. Growth. Sustainable development. Sustainability
Online Access:	http://irep.iium.edu.my/111673/7/111673_What%20explain%20capital%20structure%20determinants.pdf http://irep.iium.edu.my/111673/13/111673_What%20explain%20capital%20structure%20determinants_SCOPUS.pdf http://irep.iium.edu.my/111673/ https://archive.aessweb.com/index.php/5003/article/view/5031 https://doi.org/10.55493/5003.v14i1.5031
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spelling	my.iium.irep.1116732024-09-04T08:34:16Z http://irep.iium.edu.my/111673/ What explain capital structure determinants choices of Shariah firms? Raja, Rehan Adam Sa'ad, Auwal Rosman, Romzie Hye, Qazi Muhammad Adnan BPH Islamic Economics BPH72 Economic development. Growth. Sustainable development. Sustainability This study aims to discover key capital structure determinants for the entire Shariah firms operating in dissimilar contexts. Moreover, it also estimates the adjustment speed for these firms to maintain targeted capital structures at all times. For this purpose, 321 Shariah firms that are operational in Saudi Arabia, Pakistan, the UAE, and Indonesia are nominated. The empirical analysis is conducted using 11 years, i.e., 2011-2021, of balanced Panel Data. The debt-to-asset and debt-to-equity ratios are used as variables of interest, whereas the asset tangibility ratio, current ratio, return on equity, size, non- debt-tax shield, inflation, and gross domestic product are used as explanatory variables. The robust estimator, i.e., Generalized Method of Moments (GMM), is executed to perform the analysis. The results show that the most important factors for Shariah- tagged firms are inflation, the gross domestic product, the asset ratio, the return on equity, the non-debt tax shield, and the lagged dependent variables. The important role of asset tangibility, lagged variables, and the presence of adjustment speed postulate that Shariah-tagged firms are following the provided guidelines of Dynamic Trade-Off theory to preserve capital structure. The findings are a new contribution to the limited empirical inquiries of Shariah firms’ capital structure and a fresh addition to Islamic Finance literature. Besides, the outcomes are also helpful for policymakers and assist them in developing an optimal model of capital structure for Shariah-tagged firms that decreases overall capital costs and enhances these firms’ market value. AESS Publications 2024-03-27 Article PeerReviewed application/pdf en http://irep.iium.edu.my/111673/7/111673_What%20explain%20capital%20structure%20determinants.pdf application/pdf en http://irep.iium.edu.my/111673/13/111673_What%20explain%20capital%20structure%20determinants_SCOPUS.pdf Raja, Rehan and Adam Sa'ad, Auwal and Rosman, Romzie and Hye, Qazi Muhammad Adnan (2024) What explain capital structure determinants choices of Shariah firms? Journal of Asian Scientific Research, 14 (1). pp. 110-125. ISSN 2226-5724 E-ISSN 2223-1331 https://archive.aessweb.com/index.php/5003/article/view/5031 https://doi.org/10.55493/5003.v14i1.5031
institution	Universiti Islam Antarabangsa Malaysia
building	IIUM Library
collection	Institutional Repository
continent	Asia
country	Malaysia
content_provider	International Islamic University Malaysia
content_source	IIUM Repository (IREP)
url_provider	http://irep.iium.edu.my/
language	English English
topic	BPH Islamic Economics BPH72 Economic development. Growth. Sustainable development. Sustainability
spellingShingle	BPH Islamic Economics BPH72 Economic development. Growth. Sustainable development. Sustainability Raja, Rehan Adam Sa'ad, Auwal Rosman, Romzie Hye, Qazi Muhammad Adnan What explain capital structure determinants choices of Shariah firms?
description	This study aims to discover key capital structure determinants for the entire Shariah firms operating in dissimilar contexts. Moreover, it also estimates the adjustment speed for these firms to maintain targeted capital structures at all times. For this purpose, 321 Shariah firms that are operational in Saudi Arabia, Pakistan, the UAE, and Indonesia are nominated. The empirical analysis is conducted using 11 years, i.e., 2011-2021, of balanced Panel Data. The debt-to-asset and debt-to-equity ratios are used as variables of interest, whereas the asset tangibility ratio, current ratio, return on equity, size, non- debt-tax shield, inflation, and gross domestic product are used as explanatory variables. The robust estimator, i.e., Generalized Method of Moments (GMM), is executed to perform the analysis. The results show that the most important factors for Shariah- tagged firms are inflation, the gross domestic product, the asset ratio, the return on equity, the non-debt tax shield, and the lagged dependent variables. The important role of asset tangibility, lagged variables, and the presence of adjustment speed postulate that Shariah-tagged firms are following the provided guidelines of Dynamic Trade-Off theory to preserve capital structure. The findings are a new contribution to the limited empirical inquiries of Shariah firms’ capital structure and a fresh addition to Islamic Finance literature. Besides, the outcomes are also helpful for policymakers and assist them in developing an optimal model of capital structure for Shariah-tagged firms that decreases overall capital costs and enhances these firms’ market value.
format	Article
author	Raja, Rehan Adam Sa'ad, Auwal Rosman, Romzie Hye, Qazi Muhammad Adnan
author_facet	Raja, Rehan Adam Sa'ad, Auwal Rosman, Romzie Hye, Qazi Muhammad Adnan
author_sort	Raja, Rehan
title	What explain capital structure determinants choices of Shariah firms?
title_short	What explain capital structure determinants choices of Shariah firms?
title_full	What explain capital structure determinants choices of Shariah firms?
title_fullStr	What explain capital structure determinants choices of Shariah firms?
title_full_unstemmed	What explain capital structure determinants choices of Shariah firms?
title_sort	what explain capital structure determinants choices of shariah firms?
publisher	AESS Publications
publishDate	2024
url	http://irep.iium.edu.my/111673/7/111673_What%20explain%20capital%20structure%20determinants.pdf http://irep.iium.edu.my/111673/13/111673_What%20explain%20capital%20structure%20determinants_SCOPUS.pdf http://irep.iium.edu.my/111673/ https://archive.aessweb.com/index.php/5003/article/view/5031 https://doi.org/10.55493/5003.v14i1.5031
_version_	1811679595845386240
score	13.211869

What explain capital structure determinants choices of Shariah firms?

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