Search

This study examines a measurement invariance of a second-order factor model of the behavioral biases in Islamic banking and finance activities among Muslims in Malaysia. Data elicited via a survey questionnaire was subjected to structural equation modeling analysis using the Amos 23.0 software. The study revealed that behavioral biases as a second-order factor is indicated by herding, cognitive dissonance, anchoring, regret aversion and overconfidence of first-order factors. Measurement invariance was tested based on self-reported religiosity across a number of hierarchically structured invariance analysis models, including configural at the first-order level, metric, intercepts, and residuals at both the first-order and second-order levels. A significant variance was observed between the high and low self-reported religiosity groups. However, no difference was observed between the two groups and the 'moderate' self-reported religiosity groups. Furthermore, based on the critical ratio score of statistical significance at alpha of 0.001, the latent mean difference tests of the second-order model indicates statistical significance across groups based on a path-by-path analysis. [ABSTRACT FROM AUTHOR]

Islamic Capital Market (ICM) is expanding rapidly worldwide and Indonesia is following very closely. Examining 290 shariah-compliant Indonesian firms, we found that certain firm and industry level determinants do influence the debt financing without ignoring the shariah principles governing the decisions. The ICM accelerating growth is very much reflected in the findings, thus contributing significantly in the literature and to the policymakers as well. Being shariah-compliant does not hinder them from engaging in higher debt with Islamic debt instruments employed as alternatives. [ABSTRACT FROM AUTHOR]

Despite its accelerating use in the financial market, embedded options receive contradicting opinions with regards to its permissibility based on Shari'ah principles. This study will examine the existence of the gharar element in the pricing of embedded options (warrants), especially in the case of mispricing. The Black Scholes Option Pricing Model (BSOPM), a robust set of methods, is used to analyze the pricing efficiency of warrants market and to detect any mispricing in warrants contracts in Malaysia. Looking from the perspective of an informationally efficient market, there seems to be a pricing inefficiency in the local warrants market in reference to its theoretical values. This mispricing of warrants indicate inefficiency in the warrants market and the element of gharar in a warrants contract is viewed from the mispricing detected in the study. Mispricing of warrants in the Malaysian market indicates speculative activities, and speculation is not allowed in Islam. Speculation is prohibited in Islam as it may contain excessive gharar (uncertainty) and maysir (gambling). These may then result in wealth accumulation at the expense of the jahil (ignorance) other parties'. This activity violates the concept of adl (justice), does not serve the concept of maslahah (public interest) and does not comply with maqasid al-shari'ah. [ABSTRACT FROM AUTHOR]