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Challenges to Shariah equity screening, from Shariah scholars’ perspective

Challenges to Shariah equity screening, from Shariah scholars’ perspective PurposeThis paper aims to examine the challenges of applying Shariah law in the equity market by engaging in narratives with Shariah screeners and advisors on how they conduct their screening responsibilities despite the low levels of Islamic-related disclosure made by companies in their annual reports. The Shariah screening processes in three countries with different Islamic equity markets – Malaysia, Saudi Arabia and the United Kingdom – are examined.Design/methodology/approachThe authors interview 19 Shariah screeners and advisors in three different Islamic equity markets – Malaysia, Saudi Arabia and the United Kingdom.FindingsOverall, the findings in this study show that despite the differences in the regulatory environment, companies still make Islamic-related disclosures on a voluntary basis. However, the lack of Islamic-related disclosures presents various challenges for Shariah screeners, particularly when identifying the operations that constitute the main activity of the company in screening for prohibited activities.Research limitations/implicationsShariah screeners can play an important role in increasing the level of understanding and perhaps increasing Islamic-related disclosures in annual reports by establishing a set of effective guidelines or practices for Shariah screeners to use when screening companies for their Shariah-compliant status.Originality/valueThe paper identifies a gap in the Shariah screening literature and voluntary Islamic disclosures literature. By identifying this gap, the paper highlights the challenges Shariah screeners and advisors face because of the low level of Islamic-related disclosures. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Islamic and Middle Eastern Finance and Management Emerald Publishing

Challenges to Shariah equity screening, from Shariah scholars’ perspective

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1753-8394
DOI
10.1108/IMEFM-11-2016-0165
Publisher site
See Article on Publisher Site

Abstract

PurposeThis paper aims to examine the challenges of applying Shariah law in the equity market by engaging in narratives with Shariah screeners and advisors on how they conduct their screening responsibilities despite the low levels of Islamic-related disclosure made by companies in their annual reports. The Shariah screening processes in three countries with different Islamic equity markets – Malaysia, Saudi Arabia and the United Kingdom – are examined.Design/methodology/approachThe authors interview 19 Shariah screeners and advisors in three different Islamic equity markets – Malaysia, Saudi Arabia and the United Kingdom.FindingsOverall, the findings in this study show that despite the differences in the regulatory environment, companies still make Islamic-related disclosures on a voluntary basis. However, the lack of Islamic-related disclosures presents various challenges for Shariah screeners, particularly when identifying the operations that constitute the main activity of the company in screening for prohibited activities.Research limitations/implicationsShariah screeners can play an important role in increasing the level of understanding and perhaps increasing Islamic-related disclosures in annual reports by establishing a set of effective guidelines or practices for Shariah screeners to use when screening companies for their Shariah-compliant status.Originality/valueThe paper identifies a gap in the Shariah screening literature and voluntary Islamic disclosures literature. By identifying this gap, the paper highlights the challenges Shariah screeners and advisors face because of the low level of Islamic-related disclosures.

Journal

International Journal of Islamic and Middle Eastern Finance and ManagementEmerald Publishing

Published: Jun 19, 2017

References