Shariah-compliant firms and firm leverage: evidence from firm-level time varying quasi experimental analysis for MENA countries
Humanities and Social Sciences Communications, vol.12, no.1, 2025 (AHCI, SSCI, Scopus)
- Publication Type: Article / Article
- Volume: 12 Issue: 1
- Publication Date: 2025
- Doi Number: 10.1057/s41599-025-05001-9
- Journal Name: Humanities and Social Sciences Communications
- Journal Indexes: Arts and Humanities Citation Index (AHCI), Social Sciences Citation Index (SSCI), Scopus, Index Islamicus, Directory of Open Access Journals
- Anadolu University Affiliated: Yes
Abstract
This study undertakes an examination of financial leverage, synonymous with firm risk or capital structure, within the context of Shariah-compliant firms. Analyzing firm-level data covering 500 nonfinancial firms across 9 MENA countries, this research employs a time-varying quasi-experimental approach to delve into the primary objective of assessing the comparative financial leverage or capital structure of Shariah-compliant firms concerning their non-Shariah counterparts. We employ time-varying quasi-experimental methods, namely time-varying difference-in-differences methodology, to explore the relative time-varying effect of Shariah-compliance on the firm leverage in the MENA Region. The results unequivocally highlight a distinct trend that the Shariah-compliant firms exhibit notably lower financial leverage compared to their non-Shariah counterparts, even if we consider the time-varying Shariah-compliance dimension. These findings, substantiated through robust modeling techniques, offer compelling insights into the financial dynamics and risk profiles of Shariah-compliant entities across the MENA region.