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AuthorBen-Nasr, Hamdi
AuthorGhouma, Hatem H.
Available date2023-01-18T08:39:01Z
Publication Date2022
Publication NameEmerging Markets Review
ResourceScopus
URIhttp://dx.doi.org/10.1016/j.ememar.2021.100840
URIhttp://hdl.handle.net/10576/38556
AbstractThis paper builds on prior research and argues that religion, as an informal cultural institution, may impose constraints on corporations. The framework of Shariah-compliant firms presents a unique opportunity to investigate this assertion and checks whether firms with Islamic label pay out more or less dividend. Since Islamic Law narrows the investment opportunity sets for Shariah-compliant firms, one would expect Shariah-compliant firms to pay out more dividends to shareholders (investment constraint hypothesis). On the other hand, the prohibition of interest-bearing financing, make of retained earnings an appealing alternative to finance projects, hence resulting in lower dividend payouts (financing constraint hypothesis). Tests on a sample of 13,249 firm-year observations from 17 Islamic countries support the investment constraint hypothesis: Shariah-compliant firms pay out more dividends than non-Shariah compliant ones. Our results are robust to various specifications and after controlling for different variables and addressing potential endogeneity concerns. 2021 Elsevier B.V.
SponsorHatem Ghouma acknowldges financial support from Gerarld Shwartz School of Business and St. Francis Xavier University (grant number 98729 ). Hamdi Ben-Nasr acknowledges financial support from Qatar University , QUUG-CBE-DFE-17/18-6 . Both authors thank IdealRatings for providing screening data on Shariah-Compliant firms.
Languageen
PublisherElsevier
SubjectDividend
Islamic label
Religion
Shariah-compliant firms
TitleDividend policy and religion: International evidence from firms with Islamic Label
TypeArticle
Volume Number50
dc.accessType Abstract Only


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