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How Informative Are Stock Prices of Islamic Banks?

Research output: Working paper

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Abstract

Using a sample of 2,210 observations for 170
banks operating in 12 countries with dual banking systems
over 2006–2017 period, we find that Islamic banks have
lower stock return nonsynchronicity, lower illiquidity ratio,
and their current returns have lower future earnings
prediction ability than conventional banks. Hence Islamic
banks have less information content in stock prices than
conventional banks that can be due to their lower degree of
transparency mandated by their financial paradigm. This
suggests that for Islamic banks, market discipline may not be
as effective as it is for conventional banks and hence they
require more direct supervision. Our findings have important
implications for policy-makers and investors.
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Details

Original languageEnglish
Number of pages31
Publication statusPublished - 2019

    Research areas

  • Stock Return Non-Synchronicity; Stock Illiquidity; Future Earnings Prediction Ability; Islamic Banking, G12, G14, G21, G30, M41

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