The effect of Sharia compliance on firms' cost of capital: study on Malaysian listed companies
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- Title
- The effect of Sharia compliance on firms' cost of capital: study on Malaysian listed companies
- Creator
- Mohamed Menaouer
- Supervisor
- Jacob Schmidt.
- Date
- 2016
- Abstract
- Islamic financial debt instruments have different characteristics compared to the conventional debt instrument, due to restrictions on the use of interest. This suggests that Sharia compliant debt instruments have a different effect on the overall cost of funds acquired by a company. This paper aims to answer the question: What is the effect of Sharia compliance on the cost of capital acquired by companies in Malaysia? The paper used a regression analysis model where, overall cost of capital represented by the Weighted Average Cost of Capital (Wacc), was a dependent variable. The capital structure, represented by the weight of debt was the first independent variable. The dummy variable of Sharia Compliance as the second independent variable and the slope dummy variable was the third dependent variable. The observations were made on 200 companies on listed on Bursa Malaysia for a time period of 11years (2006-March 2016). The estimates of Ordinary Least Square conclude that Sharia compliance do have an additional impact on the cost of funds where increasing its leverage in the same proportion as a conventional company would result in a higher Wacc, that is after a break-even point. The research suggest that banks that offers Sharia compliant debt instrument should enhance cost efficiency of these products and decrease their risk to help Malaysian compliant firms achieve competitiveness of cost of funds compared to non-compliant companies. Furthermore it was suggested that the model could be the basis for predictor of Wacc value of Sharia compliant and non-compliant firms in Bursa Malaysia.
- Subject
- Law
- Extent
- 53 pages : illustrations
- Format
- Publisher
- Regent's University London
- degree
- BAGM Law
- Language
- English
- Date Issued
- 2016
- Type
- Report
- Rights Holder
- Regent's University London & Mohamed Menaouer
- Item sets
- Theses or Dissertation