scholarly journals Capital structure of Islamic banks: a critical review of theoretical and empirical research

2017 ◽  
Vol 9 (3) ◽  
pp. 292-308 ◽  
Author(s):  
Muhammad Rizky Prima Sakti ◽  
Mohamad Ali Tareq ◽  
Buerhan Saiti ◽  
Tahir Akhtar
Keyword(s):  
Capital Structure ◽  
Empirical Research ◽  
Empirical Work ◽  
Theoretical Aspect ◽  
Capital Requirements ◽  
Future Research ◽  
Islamic Banks ◽  
Content Type ◽  
Financing Decisions ◽  
And Performance

PurposeThis paper aims to critically evaluate theoretical and empirical research into capital structure practices in Islamic banks (IBs) from four perspectives, namely, theoretical aspect and its nature, determinants of capital structure in IBs, links between capital structure and risk management and nexus between capital structure and performance of IBs. Design/methodology/approachThe authors will review and examine past studies on IBs’ capital structure from both theoretical and empirical research. FindingsThe paper concludes that most of the literature on IB capital structure is largely theoretical than empirical. The existing studies on IB capital structure have various limitations, which suggest a need for detailed empirical work. Detailed empirical research in the field of capital structure will support bank managers and policymakers in making decisions about improving capital structure. Originality/valueThis research will make several noteworthy contributions to address literature gaps for IB capital structure. Furthermore, this paper will identify areas for future research into capital structure practices and IB financing decisions. Lastly, this paper will equip regulators with guidelines for establishing sound capital requirements for IB.

Agency or stewardship?

2018 ◽  
Vol 30 (3) ◽  
pp. 1352-1373 ◽  
Author(s):  
Danny Woosik Choi ◽  
Hyun Kyung Chatfield ◽  
Robert Evans Chatfield
Keyword(s):  
Capital Structure ◽  
Least Square ◽  
Lodging Industry ◽  
Future Research ◽  
Content Type ◽  
Financing Decisions ◽  
Bivariate Correlation ◽  
Leadership Structure ◽  
Managerial Implications ◽  
The Capital Structure

Purpose This study aims to empirically investigate agency and stewardship theories in the US lodging market by examining the influence of fiscal and non-fiscal leadership structures on the debt financing decisions of lodging firms. Design/methodology/approach Secondary financial data have been collected for USA-based lodging firms. Subsequently, bivariate correlation, pooled ordinary least square) and endogeneity analyses have been performed on the data. Findings The findings support the significant influence of some corporate governance attributes on the capital structure of US lodging firms and show the limited applicability of agency and stewardship theories. Practical implications Theoretical and managerial implications are suggested in terms of balancing leadership structure attributes from the agency and stewardship theories, the capital structure of lodging firms and the future research. Originality/value Despite its importance considering the intensive capital and relatively high liabilities needed for success in the lodging industry, the influence of leadership structure on capital structure has not been examined either empirically or theoretically. Leadership structure attributes, both fiscal and non-fiscal, are included in the study to gain a richer understanding of their influence. The outcomes of the analysis suggest managerial implications for leadership structure as well as theoretical generalizability for agency and stewardship theories within the lodging industry.

Factors influencing Islamic banks’ capital structure in developing economies

2019 ◽  
Vol 10 (1) ◽  
pp. 2-20 ◽  
Author(s):  
Abdullah Awadh Abdullah Bukair
Keyword(s):  
Capital Structure ◽  
Developing Economies ◽  
Future Research ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Trade Off ◽  
Content Type ◽  
Leverage Ratio ◽  
Gcc Countries ◽  
The Capital Structure

PurposeThis paper aims to investigate the influence of company-specific attributes on capital structure decisions of Islamic banks (IBs) in Gulf Cooperation council (GCC) countries during the period 2009-2011.Design/methodology/approachTo improve the econometric estimates’ efficiency, the paper uses the generalized least square (GLS) regression model to increase the levels of freedom and reduce collinearity.FindingsThe empirical results indicate that bank size, liquidity and corporate age are positively associated with the leverage ratio of GCC IBs, supporting the trade-off theory. Inconsistent with theoretical predictions, it is found that the profitability, tangibility and growth have positive insignificant relationship with the level of leverage, suggesting these determinants are not important in capital structure decisions. Furthermore, gross domestic product (GDP) and non-debt tax shield have negative effects on the leverage ratio and significant for GDP.Research limitations/implicationsOverall, the evidence provided in the study highlights the significance of company-specific characteristics in determining and affecting the capital structure decisions of IBs in GCC countries. It is useful to use these variables in the analysis of IBs’ capital structure in the GCC region before the financial crisis in 2007. One limitation for this study is that the sample is restricted to only the Islamic banking sector. Future research could include all Islamic financial institutions (IFIs) operating within the Gulf region. Second, the study only concentrates on GCC countries to the neglect of other countries. Finally, the study controls for the country level only and does not account for firm factors. Future research could consider all these limitations. Another possible avenue is by examining other variables, such as corporate governance mechanisms.Originality/valueDespite that most previous studies investigated the determinants of the capital structure of financial conventional industries, research on Islamic banking is almost non-existent. Moreover, the extant literature on Islamic finance has been theoretically explored, and the empirical research regarding capital structure is still in the infancy stage. Accordingly, it is evident that based on the Islamic trade-off perspective, theoretical hypotheses and empirical findings provide a novel addition to the capital structure theory for IFIs.

The relationship between capital structure and performance of Islamic banks

2014 ◽  
Vol 5 (2) ◽  
pp. 158-181 ◽  
Author(s):  
Lama Tarek Al-Kayed ◽  
Sharifah Raihan Syed Mohd Zain ◽  
Jarita Duasa
Keyword(s):  
Capital Structure ◽  
Least Squares Method ◽  
Equity Capital ◽  
Future Research ◽  
Islamic Banks ◽  
Reverse Causality ◽  
Market Data ◽  
Content Type ◽  
Capital Ratios ◽  
Performance Determinants

Purpose – This paper aims to examine the effect of capital structure on Islamic banks’ (IBs) performance to provide guidance to finance managers for raising capital funds. As newcomers to the markets, IBs are facing a trade-off. They can either use high capital ratios which increase the soundness and safety of the bank and lower the required return by investors, or depend on deposits and Islamic bonds which are considered cheaper sources of funds due to their tax rebate. An IB’s management must carefully decide the appropriate mix of debt and equity, i.e. capital structure, to maximize the value of the bank. Design/methodology/approach – Using a sample of 85 IBs covering banking systems in 19 countries, the study uses a two-stage least squares method to examine the performance determinants of IBs to control the reverse causality from performance to capital structure. Findings – After control of the macroeconomic environment, financial market structure and taxation, results indicate that IBs’ performance (profitability) responds positively to an increase in equity (capital ratio). The result is consistent with the signaling theory which predicts that banks expected to have better performance credibly transmit this information through higher capital. Optimal capital structure results of the IBs found a non-monotonic U-shaped relationship between the capital-asset ratio and profitability, supporting the efficiency risk and franchise value hypotheses. Research limitations/implications – Due to limitations for market data, the study uses book accounting ratios. Future research where market data are available could use performance measures, such as Tobin’s Q in performance determinants models. Practical implications – The non-monotonic relationship found between IBs’ return on equity and capital ratios suggests that equity issuances for IBs’ with low capital ratios (lower than the turning point of 37.41 per cent) are expensive and have a negative effect on their profitability. On the other hand, managers of well-capitalized IBs (banks with capital ratios beyond 37.41 per cent) are advised to rely on equity when faced by a decision to raise capital, as the capital ratio starts to affect their profitability positively. Originality/value – Islamic banking literature has been silent on IBs’ capital structure and its relevance; this study will try to fill in the existent gap.

Corporate governance practices and capital structure decisions: the moderating effect of gender diversity

2020 ◽  
Vol 20 (5) ◽  
pp. 939-964
Author(s):  
Mohammad A.A Zaid ◽  
Man Wang ◽  
Sara T.F. Abuhijleh ◽  
Ayman Issa ◽  
Mohammed W.A. Saleh ◽  
...  
Keyword(s):  
Corporate Governance ◽  
Panel Data ◽  
Capital Structure ◽  
Generalized Method Of Moments ◽  
Gender Diversity ◽  
Business Environment ◽  
Board Structure ◽  
Content Type ◽  
Financing Decisions ◽  
The Impact

Purpose Motivated by the agency theory, this study aims to empirically examine the nexus between board attributes and a firm’s financing decisions of non-financial listed firms in Palestine and how the previous relationship is moderated and shaped by the level of gender diversity. Design/methodology/approach Multiple regression analysis on a panel data was used. Further, we applied three different approaches of static panel data “pooled OLS, fixed effect and random effect.” Fixed-effects estimator was selected as the optimal and most appropriate model. In addition, to control for the potential endogeneity problem and to profoundly analyze the study data, the authors perform the one-step system generalized method of moments (GMM) estimator. Dynamic panel GMM specification was superior in generating robust findings. Findings The findings clearly unveil that all explanatory variables in the study model have a significant influence on the firm’s financing decisions. Moreover, the results report that the impact of board size and board independence are more positive under conditions of a high level of gender diversity, whereas the influence of CEO duality on the firm’s leverage level turned from negative to positive. In a nutshell, gender diversity moderates the effect of board structure on a firm’s financing decisions. Research limitations/implications This study was restricted to one institutional context (Palestine); therefore, the results reflect the attributes of the Palestinian business environment. In this vein, it is possible to generate different findings in other countries, particularly in developed markets. Practical implications The findings of this study can draw responsible parties and policymakers’ attention in developing countries to introduce and contextualize new mechanisms that can lead to better monitoring process and help firms in attracting better resources and establishing an optimal capital structure. For instance, entities should mandate a minimum quota for the proportion of women incorporation in boardrooms. Originality/value This study provides empirical evidence on the moderating role of gender diversity on the effect of board structure on firm’s financing decisions, something that was predominantly neglected by the earlier studies and has not yet examined by ancestors. Thereby, to protrude nuanced understanding of this novel and unprecedented idea, this study thoroughly bridges this research gap and contributes practically and theoretically to the existing corporate governance–capital structure literature.

Does corporate governance affect the performance of Islamic banks? New insight into Islamic countries

2020 ◽  
Vol 20 (6) ◽  
pp. 1073-1090 ◽  
Author(s):  
Ejaz Aslam ◽  
Razali Haron
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Positive Impact ◽  
Islamic Banks ◽  
Governance Mechanism ◽  
Method Of Moment ◽  
Content Type ◽  
Return On Equity ◽  
Islamic Countries ◽  
And Performance

Purpose Corporate governance plays a significant role to overcome agency issues and develop the culture of transparency and openness. In this context, this paper aims to examine how corporate governance mechanisms affect the performance of Islamic banks (IBs). Design/methodology/approach Stepwise, two-step system generalize method of moment estimation technique is used in the analysis in which control variables are added into the model sequentially. This study used data on 129 IBs from 29 Islamic countries (Middle East, South Asia and Southeast Asia) during the period of 2008 to 2017. Findings The findings suggest that the audit committee (AUDC) and Shariah board (SB) have positive impact on the performance of IBs (return on assets and return on equity). However, board size and risk management committee have negative and significant effect on the performance of IBs. CEO duality and non-executive directors have mixed relationship with the performance of IBs. These results support the argument that IBs need to improve their financial performance through appropriate governance mechanism. Research limitations/implications The findings of the study added a new dimension to the governance research that could be a valuable source of knowledge for policymakers and regulators to improve the existing governance mechanism for better performance of IBs. Originality/value The study fills the gap in the literature by addressing the issue of corporate governance on performance of IBs across countries. Agency theory is discussed to explain the relationship between corporate governance mechanism and performance.

Internal projects as strategic tools: an organisation-level perspective and a research agenda

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Torbjørn Bjorvatn
Keyword(s):  
Project Management ◽  
Theory Development ◽  
Future Research ◽  
Content Type ◽  
Theoretical Contribution ◽  
Research Areas ◽  
Linear Relationships ◽  
Strategic Role ◽  
And Performance

PurposeThe purpose of this conceptual paper is to describe and explain how organisations use internal projects to implement organisation-level strategy objectives.Design/methodology/approachTheory development with an emphasis on explaining key constructs and their mutual relationships. The theoretical contribution is represented in a diagram along with a detailed verbal account.FindingsThe paper develops a dynamic, cross-level framework to illustrate the organisational processes and outcomes that determine project-based strategy implementation within a single organisation. The interplay between the base organisation and the project, and benefits realisation were singled out as key future research areas. The proposed framework engages with central discourses in the fields of project management, strategic management, innovation studies, knowledge management and organisation studies.Research limitations/implicationsOnly the contours of an organisation-level theory of strategically motivated internal projects are outlined. Future research must elaborate on the complexities, the non-linear relationships and the boundary conditions that follow from the proposed framework.Practical implicationsManagers are alerted to the strategic role of internal projects, how these projects help connect strategy and performance and what the accompanying organisational processes and outcomes look like.Originality/valueThe paper constitutes an early conceptual treatment of strategy-driven internal projects as a distinct project category, thus addressing a major knowledge gap in project studies. Organisational project-management theory is extended with suggestions for future research.

Reconfigurable manufacturing system: a systematic review, meta-analysis and future research directions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rajesh Pansare ◽  
Gunjan Yadav ◽  
Madhukar R. Nagare
Keyword(s):  
Manufacturing System ◽  
Meta Analysis ◽  
Future Research ◽  
Future Trends ◽  
Reconfigurable Manufacturing ◽  
Research Papers ◽  
Reconfigurable Manufacturing System ◽  
Content Type ◽  
Related Research ◽  
And Performance

Purpose Uncertainties in manufacturing and changing customer demands force manufacturing industries to adopt new strategies, such as the reconfigurable manufacturing system (RMS). To improve the implementation and performance of RMS, it is necessary to review the available literature and identify future trends in this field. This paper aims to analyze existing literature and to see trends in RMS-related research. Design/methodology/approach The systematic literature review and analysis of RMS-related research papers from 1999 to 2020 is carried out in this literature. The selected studies are analyzed based on the year of publication, journals, publishers, active authors, research design, countries, enablers, barriers, performance evaluation parameters and universities. Findings After the analysis of selected RMS-related research papers, the top countries, universities, journals, publishers and authors are identified in this domain. Research themes and trends in research are identified in this study. Besides, it has been noted that there is a need for further research in this domain and for the creation of a generalized framework that can guide researchers and practitioners to increase RMS adoption. Practical implications Research insights, guidance and observations from this paper are provided to RMS-related researchers and practitioners. Important research gaps are identified in this study, which can provide direction for future research and trends in RMS research. Originality/value The study presented focuses mainly on the method of collecting, organizing, capturing, interpreting and analyzing data to provide more insight into RMS to identify future trends in research.

Financing Decisions and Performance of Italian SMEs in the Hotel Industry

2018 ◽  
Vol 60 (4) ◽  
pp. 335-354 ◽  
Author(s):  
Marco Botta
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Optimal Level ◽  
Pecking Order ◽  
Optimal Capital Structure ◽  
Financing Decisions ◽  
Medium Enterprise ◽  
Optimal Capital ◽  
And Performance ◽  
The Relationship

This study investigates the existence of an optimal capital structure for small and medium enterprise (SME) hotels through the analysis of the relationship between financing decisions and financial performance in a large sample of Italian hotel SMEs. The results show that hotel SMEs face an optimal capital structure that allows them to maximize returns to investors, while instead having both too little and too much debt reduces their financial performance. This notwithstanding, we show that hotel SMEs are not particularly concerned with optimizing their capital structure, and their funding behavior is deeply connected with the availability of internally available funds, a typical pecking order behavior, and they result extremely slow in converging toward their optimal level of leverage so that they could improve their performance by adopting a more sophisticated financial strategy.

Exploring absorptive capacity in cross-sector social partnerships

2015 ◽  
Vol 53 (6) ◽  
pp. 1170-1183 ◽  
Author(s):  
Thomas G Pittz ◽  
Melissa Intindola
Keyword(s):  
Knowledge Sharing ◽  
Empirical Research ◽  
Absorptive Capacity ◽  
Social Needs ◽  
Future Research ◽  
Economic Sectors ◽  
Content Type ◽  
New Model ◽  
Goal Interdependence ◽  
Social Partnerships

Purpose – The purpose of this paper is to explore cross-sector partnerships (CSSPs) from a strategic perspective to consider collaborations that are long lasting and transcend initial objectives. The authors integrate the concept of absorptive capacity (ACAP) with the CSSP literature and derive two new antecedents of ACAP, trust and goal interdependency, with relevance to this context. This work responds to a call from ACAP scholars to consider the construct in alternative settings and from collaboration scholars to employ strategy research that approaches CSSPs from a viewpoint beyond a mere transactional approach. Design/methodology/approach – This manuscript presents a thorough analysis of the process literature regarding CSSPs and the construct of ACAP to consider the importance of knowledge sharing and participatory decision making in the success of collaboration efforts. The combination of these research streams results in a refined model of ACAP to be used in the CSSP context. Findings – This manuscript provides conceptual and theoretical insights into how knowledge is acquired and exploited within CSSPs. A model for ACAP in CSSPs is proposed and suggests that two new antecedents of ACAP, trust and goal interdependence, be explored in this context through subsequent empirical research. Research limitations/implications – This type of conceptual work can benefit greatly from subsequent empirical research to test the developed propositions. This model shows considerable promise for future testing, however, and has the potential to encourage additional research into knowledge sharing and long-term success of cross-sector collaborations. Practical implications – This paper fulfills the need to apply a strategic lens to CSSPs and invites future research into the mutual organizational benefits derived from collaborations that cross economic sectors. It suggests that internal organizational mechanisms exist to be developed by managers that have the potential to enhance a firms ability to recognize the value of external knowledge, acquire it, and transform it for commercial and/or social objectives. Social implications – As collaborations across economic sectors are proving vital for addressing complex social needs, this manuscript provides a new model to serve as a guidepost for successful partnerships. Originality/value – This manuscript fulfills a need to integrate strategy scholarship with CSSPs that transcends the heretofore transactional perspective. Through an exploration of the literature, a new model for ACAP is proposed including two new antecedents, trust and goal interdependence, with application to the context of cross-sector collaborations.

scholarly journals conceptual review of capital structure under risk-based capital regime, risk profile of insurer’s and performance

2021 ◽  
Vol 8 (1) ◽  
pp. 15-27
Author(s):  
Sarfaraz Ahmed Bhutto ◽  
Ikhtiar Ali Ghumro ◽  
Zulfiqar Ali Rajper ◽  
Saifullah Shaikh
Keyword(s):  
Capital Structure ◽  
Conceptual Framework ◽  
Risk Profile ◽  
Future Research ◽  
Risk Propensity ◽  
Holistic Understanding ◽  
Equity Ratio ◽  
Insurance Firms ◽  
And Performance ◽  
Corporate Risk

This paper evaluates capital structure under risk-based capital regime from the perspective of insurance firms and its performance. It also evaluates the moderating effect of insurer’s risk profile on capital-performance relationship. The authors aim to reveal ambiguities, gaps and omissions in the literature and to sketch avenues for future research. A conceptual framework for capital structure under risk-based capital era and its application is suggested focusing on equity, technical provision and required risk propensity for maximizing profit and wealth for all stakeholders. The research reviews that capital structure of insurers differs from non-insurance firms as such risk-based capital regulation must not only focus on the various types of risk but also recognized these differences. It is shown that insurers’ capital structure contains equity and technical provisions which comprises accruals and creditors, payable claims and insurance funds as an alternative of equity and financial debt as it is with conventional non insurance firms. This study thus stressed that for capital structure to best explain performance of insurers, it must be measured by equity ratio and technical provision ratio in place of debt ratio and corporate risk profile (quantitative and qualitative) must enter its sequence of performance relational analysis and effectiveness equations. We stressed further that only with the proposed conceptual framework would a holistic understanding of insurer’s capital structure be achieved while the observed contradictory and inconclusive empirical findings on capital structure and firm performance could be resolved.

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