Asian Economic and Financial Review

Evaluating the effectiveness of shariah risk management in Malaysian Islamic financial institutions

2025-07-10T21:38:09-05:00

Effective Shariah risk management is crucial for Islamic Financial Institutions (IFIs) in ensuring robust identification and mitigation of risks associated with Shariah non-compliance. Incidents related to Shariah non-compliance in Islamic financial activities can lead to a loss of trust and credibility among stakeholders. Although IFIs have implemented Shariah risk management functions to address these risks, their effectiveness remains largely unassessed. This research explores the effectiveness of Shariah risk management in IFIs in Malaysia. A quantitative research methodology was adopted, utilizing a survey questionnaire to collect data from a representative sample of all 47 IFIs in the country. The measurement was based on the Shariah Governance Policy Document (SGPD) issued by Bank Negara Malaysia (BNM), which all IFIs in Malaysia are required to implement. The study found that most IFIs have implemented a moderately effective level of Shariah risk management functions and processes. This research provides valuable insights into the effectiveness of Shariah risk management in IFIs and emphasizes the importance of establishing robust control functions and fostering a culture of Shariah compliance to improve the management of Shariah non-compliance risks.

Debunking the trends and implications of non-bank financial institutions in Bangladesh financial sector

2025-07-10T21:46:30-05:00

The purpose of this study is to analyze the trends and implications of selected NBIFs in Bangladesh's financial sector. Several variables were employed to examine the performance of the selected NBFIs, such as total capital, debt to total capital, debt to equity, capital adequacy ratio, total deposits, total loans, loan/deposit ratio, return on deposits, net interest margin, bad debts, ROI, ROA, ROC, net income, etc. Statistical measures like trend equations, R-squared, and correlation matrices were used to analyze the data. To estimate the implications of NBFIs in Bangladesh's financial sector, nine hypotheses were also tested. Seventeen different significant NBIF variables were tested using 85 trend equations and R-squared values. Their steadily rising net income, ROE, and ROA over time indicate their financial stability. NBFIs face difficulties due to restricted regulation, inefficient credit, and a lack of digital transformation. It is anticipated that the study's correlation matrix and trend analysis results will guide the selected NBFIs in Bangladesh to improve their performance. The employed methods should focus on good governance, innovation, and technology integration. This approach will not only strengthen NBFI growth but also contribute to the overall economic landscape of Bangladesh.

How does the audit committee affect ESG performance? A case of China

2025-07-10T22:00:38-05:00

This study aims to investigate the impact of Audit Committee (AC) characteristics on Environment, Social, and Governance (ESG) performance in China. The research employed foundational theories such as agency theory, legitimacy theory, stewardship theory, and stakeholder theory. A quantitative approach was adopted, encompassing descriptive statistics and Ordinary Least Squares (OLS) regression. The data was collected from a sample of 100 companies listed on the Shenzhen and Shanghai stock exchanges in China from 2020 to 2023. Secondary data was obtained from the Wind database and the annual reports of the sampled companies. The research findings indicate that AC independence has a positive impact on ESG performance, while AC gender diversity exhibits a negative impact. However, AC meeting frequency and size did not reveal significant effects. This study contributes to enriching the theoretical framework concerning the relationship between ACs and ESG performance, while also addressing existing research gaps. Furthermore, the study provides recommendations for the amendment of China's Company Law.

Credit market performance and economic security nexus in the UAE: Evidence from various estimation techniques

2025-07-10T22:14:19-05:00

This study aims to investigate the association between credit market performance and economic security in the United Arab Emirates (UAE) from 1990 to 2023 using various estimation techniques. The Gregory-Hansen cointegration test, ARDL bounds-testing approach, and DOLS, CCR, and FMOLS estimators were employed. Results from the cointegration tests show a long-term relationship between economic security and credit market performance, even with structural breaks. ARDL estimation indicates that domestic credit supply, nonperforming loans, lending interest rates, and institutional quality negatively affect both short-term and long-term economic security. These findings demonstrate that inefficiencies in the credit market, characterized by a rapid increase in credit supply and nonperforming loans, weak institutions, and a high cost of borrowing, pose a substantial challenge to the UAE's economic security and stability. Moreover, the ARDL findings suggest that oil price increases, public expenditure, foreign capital inflows, and real GDP contribute positively to economic security. These findings are confirmed by the robustness of FMOLS, CCR, and DOLS estimations. Based on these findings, policies, measures, and strategies to strengthen credit risk management in the financial sector, control unchecked credit growth, enhance the quality of economic institutions, and sustain the diversification of the economy away from oil and credit risks are recommended.

Social and behavioural influences on financial inclusion: Insights from a regional study

2025-07-23T22:28:10-05:00

The research explores financial inclusion through a novel demand-side perspective, combining behavioral and societal elements to study their impact on financial inclusion, especially in underdeveloped economic areas. The primary data for the study was obtained from 1,050 participants. The research used Structural Equation Modeling (SEM) to analyze financial inclusion in relation to behavioral biases, social norms, social networks (financial and social), social trust, and subjective norms. The findings indicate that subjective norms are the most significant factor for financial inclusion, followed by social networks, social norms, and behavioral biases. The higher-order model offers a clearer understanding, highlighting the positive impact of behavioral biases and social factors on financial inclusion. The research demonstrates that behavioral and social elements strongly determine the outcomes of financial inclusion. Financial inclusion strategies need to focus on local socio-behavioral dynamics because subjective and social norms prove to be essential drivers. The research provides useful guidance for both policymakers and financial service providers. Understanding behavioral and social factors in financial inclusion enables the development of specific and culturally appropriate strategies to build inclusive financial systems in underserved areas.

Impact of global boycotts on Israeli goods: Evidence from Islamic and non-Islamic countries using an event study approach

2025-07-24T22:44:20-05:00

The study examines the financial impact of consumer-led boycotts on the stock prices of companies affiliated with Israel in both Islamic and non-Islamic nations. Utilizing a rigorous event study methodology, this analysis considers a sample of four franchised companies from Muslim-majority countries (Malaysia and Indonesia) and three from non-Muslim countries (Japan and the USA), enabling a cross-cultural evaluation of market reactions to boycott events. The results indicate a modest adverse effect in Islamic countries, where minor declines in returns and price levels were observed during boycott periods. Non-Islamic countries, however, demonstrated a significantly positive abnormal return following boycott events, as evidenced by a consistent upward trend in Cumulative Average Abnormal Returns (CAAR). In Malaysia and Indonesia, the response was mixed, with both positive and negative impacts, suggesting inconclusive overall effects of boycotts on these economies. These findings imply that policymakers in Islamic nations may need to implement strategies to manage potential market volatility linked to boycott actions, while non-Islamic countries could develop policies to leverage observed market gains. The study further highlights the value of continued research into the effects of boycotts in Islamic markets, alongside the potential benefits of regional cooperation to promote more stable economic responses.

Institutional ownership and dividend decisions in Bangladeshi enterprises: A moderating role of profitability

2025-07-25T22:08:39-05:00

This study explores the relationship between institutional ownership and dividend decisions in Bangladeshi enterprises, as well as the moderating impact of profitability on this association. The study uses a sample of 85 Bangladeshi companies, encompassing 1,176 firm-year observations from 2008 to 2023. Panel data are analyzed using descriptive statistics, pairwise correlation, diagnostic tests, and the Tobit model. The Bootstrap standard error estimation technique is applied to enhance model efficiency. The results suggest that profitability significantly strengthens the impact of institutional ownership on dividend payments. Specifically, firms with higher profitability tend to increase dividends when they have substantial institutional shareholding, as institutional investors favor firms that provide stable returns, particularly when the firms demonstrate strong financial health. The findings provide financial managers, portfolio managers, and investors with valuable insights into the association between institutional shareholding and dividend distribution, as well as the effect of profitability on this relationship. Managers can formulate dividend policies aligned with institutional investors' preferences. The findings also enable investors to purchase shares of companies whose dividend policies match their personal preferences. Portfolio managers can use these insights to select the best securities for their clients.

Employer branding model and Generation Z work preferences in Makassar: What young talents are looking for?

2025-07-25T22:37:10-05:00

This study examines how various dimensions of employer branding influence the work preferences of Generation Z in Makassar City. As a generation with distinct values and expectations, Gen Z represents a key target for organizations aiming to attract young talent. Using a quantitative survey method, data were collected from 200 respondents aged 18-28, including final-year students, recent graduates, and young professionals. Structural Equation Modeling (SEM) with AMOS software was employed to analyze the data. Of the six employer branding dimensions studied, four—company reputation, career development, organizational culture, and corporate social image—showed a significant positive influence on Gen Z's job preferences. Surprisingly, compensation and work-life balance were not significant factors. This suggests that Gen Z prioritizes purpose, value alignment, and opportunities for personal growth over financial or lifestyle benefits. The findings are supported by Maslow’s Hierarchy of Needs, Herzberg’s Two-Factor Theory, and Value Congruence Theory, which collectively explain Gen Z’s preference for self-actualization, social validation, and shared values in the workplace. This research contributes to building a more relevant and context-specific employer branding strategy tailored to attract Generation Z talent in Indonesia’s urban environments.